Critical Contrast: SunTrust Banks (NYSE:STI) vs. City (CHCO)

SunTrust Banks (NYSE: STI) and City (NASDAQ:CHCO) are both finance companies, but which is the superior investment? We will compare the two companies based on the strength of their profitability, earnings, dividends, risk, analyst recommendations, valuation and institutional ownership.

Valuation & Earnings

This table compares SunTrust Banks and City’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
SunTrust Banks $9.74 billion 3.45 $2.27 billion $4.04 17.91
City $206.54 million 5.99 $54.31 million $3.94 20.34

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

Dividends

SunTrust Banks pays an annual dividend of $1.60 per share and has a dividend yield of 2.2%. City pays an annual dividend of $1.84 per share and has a dividend yield of 2.3%. SunTrust Banks pays out 39.6% of its earnings in the form of a dividend. City pays out 46.7% 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. SunTrust Banks has increased its dividend for 5 consecutive years and City has increased its dividend for 6 consecutive years. City is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares SunTrust Banks and City’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
SunTrust Banks 26.41% 10.94% 1.19%
City 29.49% 13.89% 1.67%

Analyst Recommendations

This is a breakdown of current ratings and price targets for SunTrust Banks and City, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
SunTrust Banks 1 11 15 0 2.52
City 0 3 1 0 2.25

SunTrust Banks currently has a consensus price target of $71.95, suggesting a potential downside of 0.55%. City has a consensus price target of $74.50, suggesting a potential downside of 7.01%. Given SunTrust Banks’ stronger consensus rating and higher probable upside, equities analysts plainly believe SunTrust Banks is more favorable than City.

Insider & Institutional Ownership

84.1% of SunTrust Banks shares are owned by institutional investors. Comparatively, 66.3% of City shares are owned by institutional investors. 0.5% of SunTrust Banks shares are owned by insiders. Comparatively, 3.8% of City shares are owned by 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.

Volatility & Risk

SunTrust Banks has a beta of 1.31, indicating that its share price is 31% more volatile than the S&P 500. Comparatively, City has a beta of 0.67, indicating that its share price is 33% less volatile than the S&P 500.

Summary

SunTrust Banks beats City on 9 of the 17 factors compared between the two stocks.

SunTrust Banks Company Profile

SunTrust Banks, Inc. operates as the holding company for SunTrust Bank that provides various financial services for consumers, businesses, corporations, and institutions in the United States. It operates through two segments, Consumer and Wholesale. The Consumer segment provides deposits and payments; home equity and personal credit lines; auto, student, and other lending products; credit cards; discount/online and full-service brokerage products; professional investment advisory products and services; and trust services, as well as family office solutions. This segment also offers residential mortgage products in the secondary market. The Wholesale segment provides capital markets solutions, including advisory, capital raising, and financial risk management, as well as lease financing solutions; cash management services and auto dealer financing solutions; and construction, mini-perm, and permanent real estate financing, as well as tailored financing and equity investment solutions. This segment also offers treasury and payment solutions, such as operating various electronic and paper payment types, which comprise card, wire transfer, automated clearing house, check, and cash; and provides services clients to manage their accounts online. The company offers its products and services through a network of traditional and in-store branches, automated teller machines, Internet, mobile, and telephone banking channels. As of December 31, 2017, it operated 1,268 full-service banking offices located in Florida, Georgia, Virginia, North Carolina, Tennessee, Maryland, South Carolina, and the District of Columbia. SunTrust Banks, Inc. was founded in 1891 and is headquartered in Atlanta, Georgia.

City Company Profile

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 accepts various deposit products, such as 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 a residence; first-lien 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. In addition, the company offers mortgage banking services, including fixed and adjustable-rate mortgages, construction financing, 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, and debit card services. As of January 31, 2018, the company operated through a network of 86 branches in West Virginia, Virginia, Kentucky, and Ohio. City Holding Company was founded in 1957 and is headquartered in Charleston, West Virginia.

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