Analyzing Heritage Financial (NASDAQ:HFWA) and OceanFirst Financial (NASDAQ:OCFC)

Heritage Financial (NASDAQ:HFWA) and OceanFirst Financial (NASDAQ:OCFC) are both small-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, dividends, profitability, valuation, analyst recommendations, institutional ownership and earnings.

Analyst Ratings

This is a summary of recent recommendations and price targets for Heritage Financial and OceanFirst Financial, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Heritage Financial	1	2	3	0	2.33
OceanFirst Financial	0	5	1	0	2.17

Heritage Financial presently has a consensus target price of $30.50, suggesting a potential upside of 5.03%. OceanFirst Financial has a consensus target price of $21.00, suggesting a potential upside of 12.90%. Given OceanFirst Financial’s higher probable upside, analysts plainly believe OceanFirst Financial is more favorable than Heritage Financial.

Profitability

This table compares Heritage Financial and OceanFirst Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Heritage Financial	20.50%	8.71%	1.13%
OceanFirst Financial	10.04%	5.35%	0.63%

Valuation & Earnings

This table compares Heritage Financial and OceanFirst Financial”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Heritage Financial	$335.97 million	3.56	$67.53 million	$2.04	14.24
OceanFirst Financial	$405.70 million	2.64	$70.98 million	$1.17	15.90

OceanFirst Financial has higher revenue and earnings than Heritage Financial. Heritage Financial is trading at a lower price-to-earnings ratio than OceanFirst Financial, indicating that it is currently the more affordable of the two stocks.

Dividends

Heritage Financial pays an annual dividend of $0.96 per share and has a dividend yield of 3.3%. OceanFirst Financial pays an annual dividend of $0.80 per share and has a dividend yield of 4.3%. Heritage Financial pays out 47.1% of its earnings in the form of a dividend. OceanFirst Financial pays out 68.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Heritage Financial has increased its dividend for 14 consecutive years.

Insider and Institutional Ownership

78.3% of Heritage Financial shares are held by institutional investors. Comparatively, 71.0% of OceanFirst Financial shares are held by institutional investors. 1.5% of Heritage Financial shares are held by company insiders. Comparatively, 5.4% of OceanFirst Financial shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Volatility & Risk

Heritage Financial has a beta of 0.49, suggesting that its stock price is 51% less volatile than the S&P 500. Comparatively, OceanFirst Financial has a beta of 0.99, suggesting that its stock price is 1% less volatile than the S&P 500.

Summary

Heritage Financial beats OceanFirst Financial on 10 of the 17 factors compared between the two stocks.

About Heritage Financial

Heritage Financial Corporation operates as the bank holding company for Heritage Bank that provides various financial services to small and medium sized businesses and individuals in the United States. It accepts various deposit products, such as noninterest demand deposits, interest bearing demand deposits, money market accounts, savings accounts, personal checking accounts, and certificates of deposit. The company’s loan portfolio includes commercial and industrial loans, owner-occupied and non-owner occupied commercial real estate loans, one-to-four family residential loans, real estate construction and land development loans, consumer loans, commercial business loans, lines of credit, term equipment financing, and term real estate loans, as well as commercial business loans to a range of businesses in industries that include real estate and rental and leasing, healthcare, accommodation and food services, retail trade, and construction. It also originates loans that are guaranteed by the U.S. Small Business Administration; and provides objective advice from trusted advisers. The company was formerly known as Heritage Financial Corporation, M.H.C. and changed its name to Heritage Financial Corporation in 1998. Heritage Financial Corporation was founded in 1927 and is headquartered in Olympia, Washington.

About OceanFirst Financial

OceanFirst Financial Corp. operates as the bank holding company for OceanFirst Bank N.A. that provides community banking services to retail and commercial customers. It accepts money market accounts, savings accounts, interest-bearing checking accounts, non-interest-bearing accounts, and time deposits, that includes brokered deposits to retail, government, and business customers. The company also offers commercial real estate, multi-family, land loans, construction, and commercial and industrial loans; fixed-rate and adjustable-rate mortgage loans that are secured by one-to-four family residences; and consumer loans, such as home equity loans and lines of credit, student loans, overdraft line of credit, loans on savings accounts, and other consumer loans. In addition, it invests in mortgage-backed securities, securities issued by the U.S. Government and agencies, corporate securities, and other investments. Further, the company offers bankcard, trust and asset management services; and bank owned life insurance products. The company was founded in 1902 and is based in Red Bank, New Jersey.