Analyzing Independent Bank Group (NASDAQ:IBTX) & ConnectOne Bancorp (NASDAQ:CNOB)

ConnectOne Bancorp (NASDAQ:CNOB) and Independent Bank Group (NASDAQ:IBTX) 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, analyst recommendations, earnings, institutional ownership, valuation, profitability and risk.

Insider & Institutional Ownership

67.7% of ConnectOne Bancorp shares are held by institutional investors. Comparatively, 77.9% of Independent Bank Group shares are held by institutional investors. 6.4% of ConnectOne Bancorp shares are held by insiders. Comparatively, 3.5% of Independent Bank Group shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares ConnectOne Bancorp and Independent Bank Group’s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ConnectOne Bancorp	$504.07 million	1.35	$87.00 million	$1.89	9.40
Independent Bank Group	$922.84 million	1.97	$43.20 million	$2.53	17.34

ConnectOne Bancorp has higher earnings, but lower revenue than Independent Bank Group. ConnectOne Bancorp is trading at a lower price-to-earnings ratio than Independent Bank Group, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares ConnectOne Bancorp and Independent Bank Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ConnectOne Bancorp	15.29%	7.39%	0.83%
Independent Bank Group	10.96%	4.97%	0.63%

Risk and Volatility

ConnectOne Bancorp has a beta of 1.27, meaning that its stock price is 27% more volatile than the S&P 500. Comparatively, Independent Bank Group has a beta of 1.41, meaning that its stock price is 41% more volatile than the S&P 500.

Dividends

ConnectOne Bancorp pays an annual dividend of $0.72 per share and has a dividend yield of 4.1%. Independent Bank Group pays an annual dividend of $1.52 per share and has a dividend yield of 3.5%. ConnectOne Bancorp pays out 38.1% of its earnings in the form of a dividend. Independent Bank Group pays out 60.1% 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. ConnectOne Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a breakdown of current recommendations for ConnectOne Bancorp and Independent Bank Group, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ConnectOne Bancorp	0	1	2	1	3.00
Independent Bank Group	0	2	4	0	2.67

ConnectOne Bancorp presently has a consensus price target of $24.00, suggesting a potential upside of 35.06%. Independent Bank Group has a consensus price target of $52.33, suggesting a potential upside of 19.32%. Given ConnectOne Bancorp’s stronger consensus rating and higher possible upside, analysts clearly believe ConnectOne Bancorp is more favorable than Independent Bank Group.

Summary

ConnectOne Bancorp beats Independent Bank Group on 10 of the 17 factors compared between the two stocks.

About ConnectOne Bancorp

ConnectOne Bancorp, Inc. operates as the bank holding company for ConnectOne Bank that provides commercial banking products and services for small and mid-sized businesses, local professionals, and individuals in the New York Metropolitan area and South Florida market. The company offers personal and business checking, money market, and time and savings accounts; credit cards, wire transfers, safe deposit boxes, automated teller services and telephone, and internet and mobile banking. It provides retirement accounts, consumers and cash management services for business clients, including treasury direct, automated clearing house, remote deposit capture, and digital invoicing. In addition, the company offers consumer and commercial business loans, including lines of credit, commercial and residential mortgages, home equity and bridge loans, and other personal loans; commercial loans secured by collateral, such as business assets comprising accounts receivable, inventory and equipment, and mortgages filed on commercial and residential real estate, as well as cash balances and marketable securities. Further, it provides real estate loans, which includes loans secured by first liens on completed commercial properties, including multi-family properties, to purchase or refinance properties; residential mortgages, such as loans secured by first liens on 1-4 family and condominium; and cooperative residential real estate loans. The company was formerly known as Center Bancorp, Inc. and changed its name to ConnectOne Bancorp, Inc. in July 2014. ConnectOne Bancorp, Inc. was incorporated in 1982 and is headquartered in Englewood Cliffs, New Jersey.

About Independent Bank Group

Independent Bank Group, Inc., through its subsidiary, Independent Bank provides various commercial banking products and services to businesses, professionals, and individuals in the United States. It accepts various deposit products, including checking and savings accounts, demand deposits, money market accounts, and certificates of deposit. The company also provides commercial real estate loans; commercial construction, land, and land development loans; residential real estate loans; single-family interim construction loans; commercial loans, such as SBA guaranteed loans, business term loans, lines of credit, and energy related loans; agricultural loans for farmers and ranchers; consumer installment loans comprising loans to purchase cars, boats, and other recreational vehicles; and residential mortgages, as well as mortgage warehouse purchase loans. In addition, it offers debit and credit cards, online and mobile banking, estatement, bank-by-mail, and direct deposit services; wealth management services; and business accounts and management services consisting of analyzed business checking, business savings, and treasury management services. The company was incorporated in 2002 and is headquartered in McKinney, Texas.