Financial Review: Eagle Financial Services (NASDAQ:EFSI) versus City (NASDAQ:CHCO)

Eagle Financial Services (NASDAQ:EFSI) and City (NASDAQ:CHCO) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, earnings, valuation, institutional ownership, profitability, risk and analyst recommendations.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Eagle Financial Services and City, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Eagle Financial Services	0	2	2	0	2.50
City	0	5	1	0	2.17

Eagle Financial Services currently has a consensus price target of $42.25, indicating a potential upside of 8.33%. City has a consensus price target of $134.50, indicating a potential upside of 5.89%. Given Eagle Financial Services’ stronger consensus rating and higher possible upside, equities research analysts plainly believe Eagle Financial Services is more favorable than City.

Dividends

Eagle Financial Services pays an annual dividend of $1.24 per share and has a dividend yield of 3.2%. City pays an annual dividend of $3.48 per share and has a dividend yield of 2.7%. Eagle Financial Services pays out 95.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. City pays out 38.9% of its earnings in the form of a dividend. Eagle Financial Services has increased its dividend for 14 consecutive years and City has increased its dividend for 6 consecutive years. Eagle Financial Services is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Eagle Financial Services and City’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Eagle Financial Services	7.76%	9.99%	0.92%
City	32.56%	16.61%	1.95%

Earnings and Valuation

This table compares Eagle Financial Services and City”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Eagle Financial Services	$105.89 million	1.98	$8.21 million	$1.30	30.00
City	$398.98 million	4.59	$130.49 million	$8.94	14.21

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

Institutional and Insider Ownership

0.3% of Eagle Financial Services shares are held by institutional investors. Comparatively, 72.4% of City shares are held by institutional investors. 12.3% of Eagle Financial Services shares are held by insiders. Comparatively, 1.9% of City shares are held by 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

Eagle Financial Services has a beta of 0.2, suggesting that its stock price is 80% less volatile than the S&P 500. Comparatively, City has a beta of 0.52, suggesting that its stock price is 48% less volatile than the S&P 500.

Summary

City beats Eagle Financial Services on 10 of the 17 factors compared between the two stocks.

About Eagle Financial Services

Eagle Financial Services, Inc. operates as the bank holding company for Bank of Clarke County that provides various retail and commercial banking products and services in the Shenandoah Valley and Northern Virginia. The company’s deposit products include checking, NOW, money market, and regular savings accounts; and demand and time deposits. Its loan portfolio comprises one-to-four-family residential real estate, commercial real estate, construction and land development, and commercial and industrial loans, as well as secured and unsecured consumer loans, which include personal installment loans, personal lines of credit, automobile loans, and credit card loans. The company also offers personal and retirement plan services; investment services comprising tax-deferred annuities, IRAs and rollovers, mutual funds, retirement plans, college savings plans, life insurance, long term care insurance, fixed income investing, brokerage CDs, and full service or discount brokerage services; non-deposit investment products; and title insurance products. In addition, it provides ATM and debit cards; and telephone, internet, and mobile banking services, as well as other commercial deposit account services, such as ACH origination and remote deposit capture services. The company operates through twelve full-service branches, two loan production offices, one wealth management office, and one drive-through only facility, as well as 13 ATM locations in the Virginia communities of Berryville, Winchester, Boyce, Stephens City, Purcellville, Warrenton, Leesburg, Ashburn, and Fairfax. Eagle Financial Services, Inc. was founded in 1881 and is headquartered in Berryville, Virginia.

About City

City Holding Company operates as a holding company for City National Bank of West Virginia that provides various banking, trust, and investment management, and other financial solutions in the United States. The company offers checking, savings, and money market accounts, as well as certificates of deposit and individual retirement accounts. It also provides commercial and industrial loans that consist of loans to corporate and other legal entity borrowers primarily in small to mid-size industrial and commercial companies; commercial real estate loans comprising commercial mortgages, which are secured by nonresidential and multi-family residential properties; residential real estate loans to consumers for the purchase or refinance of residence; first-priority home equity loans; home equity lines of credit; amortized home equity loans; consumer loans that are secured and unsecured by automobiles, boats, recreational vehicles, certificates of deposit, and other personal property; and demand deposit account overdrafts, as well as owner-occupied real estate and construction, land development, and lines of credit. In addition, the company offers mortgage banking services, including fixed and adjustable-rate mortgages, construction financing, land loans, production of conventional and government-insured mortgages, secondary marketing, and mortgage servicing. Further, it provides deposit services for commercial customers comprising treasury management, lockbox, and other cash management services; merchant credit card services; wealth management, trust, investment, and custodial services for commercial and individual customers; and corporate trust and institutional custody, financial and estate planning, and retirement plan services, as well as automated-teller-machine, interactive-teller-machine, mobile banking, interactive voice response systems, and credit and debit card services. City Holding Company was founded in 1957 and is headquartered in Charleston, West Virginia.