Critical Survey: FS Bancorp (NASDAQ:FSBW) & Western Alliance Bancorporation (NYSE:WAL)

FS Bancorp (NASDAQ:FSBW) and Western Alliance Bancorporation (NYSE:WAL) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their risk, valuation, profitability, earnings, analyst recommendations, institutional ownership and dividends.

Insider and Institutional Ownership

63.9% of FS Bancorp shares are owned by institutional investors. Comparatively, 79.2% of Western Alliance Bancorporation shares are owned by institutional investors. 12.9% of FS Bancorp shares are owned by company insiders. Comparatively, 2.7% of Western Alliance Bancorporation shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Dividends

FS Bancorp pays an annual dividend of $1.16 per share and has a dividend yield of 2.8%. Western Alliance Bancorporation pays an annual dividend of $1.68 per share and has a dividend yield of 2.0%. FS Bancorp pays out 27.0% of its earnings in the form of a dividend. Western Alliance Bancorporation pays out 19.6% 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. FS Bancorp has increased its dividend for 12 consecutive years and Western Alliance Bancorporation has increased its dividend for 5 consecutive years. FS Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

FS Bancorp has a beta of 0.67, suggesting that its share price is 33% less volatile than the S&P 500. Comparatively, Western Alliance Bancorporation has a beta of 1.37, suggesting that its share price is 37% more volatile than the S&P 500.

Valuation & Earnings

This table compares FS Bancorp and Western Alliance Bancorporation”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
FS Bancorp	$219.52 million	1.41	$33.35 million	$4.29	9.63
Western Alliance Bancorporation	$5.37 billion	1.66	$969.00 million	$8.59	9.57

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

Profitability

This table compares FS Bancorp and Western Alliance Bancorporation’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
FS Bancorp	14.91%	10.99%	1.04%
Western Alliance Bancorporation	17.03%	13.58%	1.09%

Analyst Ratings

This is a breakdown of current recommendations for FS Bancorp and Western Alliance Bancorporation, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
FS Bancorp	0	1	1	0	2.50
Western Alliance Bancorporation	0	5	9	0	2.64

FS Bancorp presently has a consensus target price of $46.00, indicating a potential upside of 11.35%. Western Alliance Bancorporation has a consensus target price of $93.14, indicating a potential upside of 13.36%. Given Western Alliance Bancorporation’s stronger consensus rating and higher probable upside, analysts plainly believe Western Alliance Bancorporation is more favorable than FS Bancorp.

Summary

Western Alliance Bancorporation beats FS Bancorp on 13 of the 17 factors compared between the two stocks.

About FS Bancorp

FS Bancorp, Inc. operates as a bank holding company for 1st Security Bank of Washington that provides banking and financial services to local families, local and regional businesses, and industry niches. The company operates in two segments, Commercial and Consumer Banking; and Home Lending. It offers various deposit instruments, including checking accounts, money market deposit accounts, savings accounts, and certificates of deposit. The company provides one-to-four-family residential first mortgages, second mortgage/home equity loan products, non-mortgage commercial business loans, commercial real estate loans, and construction and development loans, as well as consumer loans, which primarily include personal lines of credit, credit cards, automobile, direct home improvement, loans on deposit, and recreational loans. It operates full bank service branches and home loan production offices in suburban communities in the greater Puget Sound area, including Snohomish, King, Pierce, Jefferson, Kitsap, Clallam, Grays Harbor, and Thurston counties; and a loan production office in the market area of the Tri-Cities. FS Bancorp, Inc. was founded in 1936 and is headquartered in Mountlake Terrace, Washington.

About Western Alliance Bancorporation

Western Alliance Bancorporation operates as the bank holding company for Western Alliance Bank that provides various banking products and related services primarily in Arizona, California, and Nevada. It operates through Commercial and Consumer Related segments. The company offers deposit products, including checking, savings, and money market accounts, as well as fixed-rate and fixed maturity certificates of deposit accounts; demand deposits; and treasury management and residential mortgage products and services. It also provides commercial and industrial loan products, such as working capital lines of credit, loans to technology companies, inventory and accounts receivable lines, mortgage warehouse lines, equipment loans and leases, and other commercial loans; commercial real estate loans, which are secured by multi-family residential properties, professional offices, industrial facilities, retail centers, hotels, and other commercial properties; construction and land development loans for single family and multi-family residential projects, industrial/warehouse properties, office buildings, retail centers, medical office facilities, and residential lot developments; and consumer loans. In addition, the company provides other financial services, such as internet banking, wire transfers, electronic bill payment and presentment, funds transfer and other digital payment offerings, lock box services, courier, and cash management services. Further, the company holds certain investment securities, municipal and non-profit loans, and leases; invests primarily in low-income housing tax credits and small business investment corporations; and holds certain real estate loans and related securities. Western Alliance Bancorporation was founded in 1994 and is headquartered in Phoenix, Arizona.