First National (NASDAQ:FXNC) & CapStar Financial (NASDAQ:CSTR) Critical Contrast

First National (NASDAQ:FXNC) and CapStar Financial (NASDAQ:CSTR) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their institutional ownership, risk, dividends, profitability, analyst recommendations, earnings and valuation.

Earnings and Valuation

This table compares First National and CapStar Financial’s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First National	$69.50 million	1.46	$9.62 million	$1.53	10.63
CapStar Financial	$184.34 million	2.27	$29.80 million	$1.57	12.80

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

Dividends

First National pays an annual dividend of $0.60 per share and has a dividend yield of 3.7%. CapStar Financial pays an annual dividend of $0.44 per share and has a dividend yield of 2.2%. First National pays out 39.2% of its earnings in the form of a dividend. CapStar Financial pays out 28.0% 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. First National has increased its dividend for 8 consecutive years and CapStar Financial has increased its dividend for 3 consecutive years. First National is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares First National and CapStar Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First National	13.85%	8.58%	0.70%
CapStar Financial	16.17%	8.46%	0.93%

Risk & Volatility

First National has a beta of 0.52, suggesting that its share price is 48% less volatile than the S&P 500. Comparatively, CapStar Financial has a beta of 0.79, suggesting that its share price is 21% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings for First National and CapStar Financial, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First National	0	1	0	0	2.00
CapStar Financial	0	1	0	0	2.00

First National currently has a consensus price target of $19.00, indicating a potential upside of 16.85%. CapStar Financial has a consensus price target of $15.58, indicating a potential downside of 22.47%. Given First National’s higher possible upside, research analysts plainly believe First National is more favorable than CapStar Financial.

Institutional and Insider Ownership

33.9% of First National shares are owned by institutional investors. Comparatively, 52.2% of CapStar Financial shares are owned by institutional investors. 16.5% of First National shares are owned by insiders. Comparatively, 9.2% of CapStar Financial shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Summary

CapStar Financial beats First National on 10 of the 15 factors compared between the two stocks.

About First National

First National Corporation operates as the bank holding company for First Bank that provides various commercial banking services to small and medium-sized businesses, individuals, estates, local governmental entities, and non-profit organizations in Virginia. The company's deposit products include checking, savings, money market, and individual retirement accounts, as well as certificates of deposit and treasury management solutions. Its loan products comprise construction loans, including residential, land acquisition, and development loans; 1-4 family residential real estate loans; and commercial real estate loans that are secured by commercial real estate, including multi-family residential buildings, office and retail buildings, hotels, industrial buildings, and religious facilities. The company's loan products also include commercial and industrial loans that are secured by business assets, such as accounts receivable, equipment, and inventory; home equity loans; and secured and unsecured consumer loans, such as lines of credit, automobile loans, deposit account loans, and installment and demand loans. In addition, it provides wealth management services, including estate planning, investment management of assets, trustee under an agreement, trustee under a will, and estate settlement. Further, the company offers title insurance and investment services; and holds other real estate owned and office sites, as well as provides internet and mobile banking, remote deposit capture, and other traditional banking services. First National Corporation was founded in 1907 and is headquartered in Strasburg, Virginia.

About CapStar Financial

CapStar Financial Holdings, Inc. operates as the bank holding company for CapStar Bank that provides banking and other financial services to individuals and corporate customers in Tennessee, the United States. It offers noninterest-bearing demand deposits, interest-bearing transaction accounts, money market accounts, savings accounts, and time deposits; mortgage banking products; and wealth management and treasury management services. The company also provides commercial and residential real estate, construction and land development, commercial and industrial, consumer, non-owner-occupied real estate, home equity, paycheck protection program (PPP), and other loans, as well as business term loans, equipment financing, and lines of credit to small and medium sized businesses. In addition, it offers mobile banking services; and debit and credit cards. CapStar Financial Holdings, Inc. was founded in 2007 and is headquartered in Nashville, Tennessee.