Financial Survey: Heritage Financial (HFWA) vs. United Financial Bancorp (UBNK)

Heritage Financial (NASDAQ: HFWA) and United Financial Bancorp (NASDAQ:UBNK) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, earnings, valuation, dividends, profitability, risk and analyst recommendations.

Dividends

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Heritage Financial pays an annual dividend of $0.60 per share and has a dividend yield of 2.0%. United Financial Bancorp pays an annual dividend of $0.48 per share and has a dividend yield of 2.9%. Heritage Financial pays out 40.5% of its earnings in the form of a dividend. United Financial Bancorp pays out 42.9% 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.

Volatility & Risk

Heritage Financial has a beta of 0.49, suggesting that its share price is 51% less volatile than the S&P 500. Comparatively, United Financial Bancorp has a beta of 0.66, suggesting that its share price is 34% less volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Heritage Financial 21.16% 8.86% 1.11%
United Financial Bancorp 20.25% 8.41% 0.83%

Valuation and Earnings

This table compares Heritage Financial and United Financial Bancorp’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Heritage Financial $183.29 million 5.64 $41.79 million $1.48 20.54
United Financial Bancorp $269.65 million 3.12 $54.61 million $1.12 14.71

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

Analyst Recommendations

This is a summary of current recommendations for Heritage Financial and United Financial Bancorp, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Heritage Financial 0 1 4 0 2.80
United Financial Bancorp 0 3 1 0 2.25

Heritage Financial currently has a consensus price target of $34.50, suggesting a potential upside of 13.49%. United Financial Bancorp has a consensus price target of $19.33, suggesting a potential upside of 17.31%. Given United Financial Bancorp’s higher probable upside, analysts plainly believe United Financial Bancorp is more favorable than Heritage Financial.

Institutional and Insider Ownership

70.9% of Heritage Financial shares are owned by institutional investors. Comparatively, 66.1% of United Financial Bancorp shares are owned by institutional investors. 2.7% of Heritage Financial shares are owned by company insiders. Comparatively, 3.5% of United Financial Bancorp shares are owned 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.

Summary

Heritage Financial beats United Financial Bancorp on 10 of the 16 factors compared between the two stocks.

Heritage Financial Company Profile

Heritage Financial Corporation operates as the bank holding company for Heritage Bank that provides various financial services to businesses and individuals in the United States. The company accepts various deposit products, such as noninterest demand accounts, interest bearing demand deposits, money market accounts, savings accounts, personal checking accounts, and certificates of deposit. Its 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, business lines of credit, term equipment financing, and term real estate loans, as well as commercial loans focuses on real estate related industries and businesses in agricultural, healthcare, legal, and other professions. The company also originates loans that are guaranteed by the U.S. Small Business Administration; and offers trust services through trust powers, as well as objective advice. As of December 31, 2017, the company had a network of 59 branches located in Washington and Oregon. 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 1994 and is headquartered in Olympia, Washington.

United Financial Bancorp Company Profile

United Financial Bancorp, Inc. operates as the holding company for United Bank that provides retail, commercial, and consumer banking services to individuals, families, and businesses. The company accepts various deposits, such as interest-bearing checking, non-interest-bearing checking, regular savings, money market savings, and time deposits. Its loan products include commercial loans, commercial real estate loans, residential and commercial construction loans, residential real estate loans collateralized by one-to-four family residences, home equity lines of credit, fixed rate loans, marine floor plan loans, and other consumer loans. In addition, the company provides various financial advisory services. It has 53 banking offices, 64 ATMs, and 7 loan production offices in Connecticut and Massachusetts. The company was formerly known as Rockville Financial, Inc. and changed its name to United Financial Bancorp, Inc. in April 2014. United Financial Bancorp, Inc. was founded in 1858 and is headquartered in Hartford, Connecticut.

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