Cullen/Frost Bankers (CFR) versus First Foundation (FFWM) Critical Review

Cullen/Frost Bankers (NYSE: CFR) and First Foundation (NASDAQ:FFWM) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their analyst recommendations, institutional ownership, risk, earnings, profitability, valuation and dividends.

Analyst Recommendations

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This is a breakdown of recent ratings and price targets for Cullen/Frost Bankers and First Foundation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cullen/Frost Bankers 0 12 2 0 2.14
First Foundation 0 1 3 0 2.75

Cullen/Frost Bankers presently has a consensus price target of $103.79, suggesting a potential upside of 2.45%. First Foundation has a consensus price target of $20.63, suggesting a potential upside of 13.76%. Given First Foundation’s stronger consensus rating and higher probable upside, analysts clearly believe First Foundation is more favorable than Cullen/Frost Bankers.

Volatility and Risk

Cullen/Frost Bankers has a beta of 1.33, meaning that its share price is 33% more volatile than the S&P 500. Comparatively, First Foundation has a beta of 0.73, meaning that its share price is 27% less volatile than the S&P 500.

Insider & Institutional Ownership

80.2% of Cullen/Frost Bankers shares are owned by institutional investors. Comparatively, 54.2% of First Foundation shares are owned by institutional investors. 5.2% of Cullen/Frost Bankers shares are owned by insiders. Comparatively, 18.5% of First Foundation shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares Cullen/Frost Bankers and First Foundation’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cullen/Frost Bankers $1.23 billion 5.25 $364.14 million $5.51 18.39
First Foundation $175.52 million 4.03 $27.58 million $0.79 22.95

Cullen/Frost Bankers has higher revenue and earnings than First Foundation. Cullen/Frost Bankers is trading at a lower price-to-earnings ratio than First Foundation, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Cullen/Frost Bankers and First Foundation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cullen/Frost Bankers 29.62% 11.78% 1.17%
First Foundation 15.71% 10.28% 0.85%

Dividends

Cullen/Frost Bankers pays an annual dividend of $2.28 per share and has a dividend yield of 2.3%. First Foundation does not pay a dividend. Cullen/Frost Bankers pays out 41.4% of its earnings in the form of a dividend. Cullen/Frost Bankers has increased its dividend for 25 consecutive years.

Summary

Cullen/Frost Bankers beats First Foundation on 11 of the 17 factors compared between the two stocks.

About Cullen/Frost Bankers

Cullen/Frost Bankers, Inc. is a financial holding company and a bank holding company. The Company, through its subsidiaries, provides a range of products and services throughout Texas markets. The Company’s segments include Banking, Frost Wealth Advisors and Non-Banks. The Banking segment includes both commercial and consumer banking services, and Frost Insurance Agency. The Frost Wealth Advisors segment includes fee-based services within private trust, retirement services, and financial management services, including personal wealth management and securities brokerage services. The Non-Banks segment includes the direct and indirect ownership of its banking and non-banking subsidiaries and the issuance of debt and equity. It offers commercial and consumer banking services, as well as trust and investment management, insurance, brokerage, mutual funds, leasing, treasury management, capital markets advisory and item processing services.

About First Foundation

First Foundation Inc. is a financial services holding company that provides a platform of personalized financial services to high net-worth individuals and their families, family businesses and other affiliated organizations. The Company conducts its operations through its subsidiaries, First Foundation Advisors (FFA) and First Foundation Bank (FFB), and First Foundation Insurance Services (FFIS), a subsidiary of FFB. The Company’s segments include Banking, Investment Management and Wealth Planning (Wealth Management), and Other. The Banking segment includes the operations of FFB and FFIS, and Wealth Management segment includes the operations of FFA. The Company’s integrated platform provides investment management, wealth planning, consulting, trust, banking products and services, life insurance services and property and casualty insurance services to meet the financial needs of its clients.

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