Critical Analysis: Bank of the James Financial Group (NASDAQ:BOTJ) & First Community (NASDAQ:FCCO)

Bank of the James Financial Group (NASDAQ:BOTJ) and First Community (NASDAQ:FCCO) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, dividends, earnings, risk, analyst recommendations, valuation and profitability.

Dividends

Bank of the James Financial Group pays an annual dividend of $0.40 per share and has a dividend yield of 3.0%. First Community pays an annual dividend of $0.60 per share and has a dividend yield of 2.7%. Bank of the James Financial Group pays out 20.5% of its earnings in the form of a dividend. First Community pays out 42.0% 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. Bank of the James Financial Group has increased its dividend for 5 consecutive years. Bank of the James Financial Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Bank of the James Financial Group has a beta of 0.76, indicating that its share price is 24% less volatile than the S&P 500. Comparatively, First Community has a beta of 0.43, indicating that its share price is 57% less volatile than the S&P 500.

Insider and Institutional Ownership

18.5% of Bank of the James Financial Group shares are held by institutional investors. Comparatively, 61.3% of First Community shares are held by institutional investors. 15.3% of Bank of the James Financial Group shares are held by company insiders. Comparatively, 3.0% of First Community shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of current ratings and target prices for Bank of the James Financial Group and First Community, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bank of the James Financial Group	0	0	0	0	N/A
First Community	0	0	1	0	3.00

First Community has a consensus price target of $21.00, indicating a potential downside of 3.93%. Given First Community’s higher probable upside, analysts clearly believe First Community is more favorable than Bank of the James Financial Group.

Profitability

This table compares Bank of the James Financial Group and First Community’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bank of the James Financial Group	15.14%	14.90%	0.87%
First Community	11.60%	8.44%	0.59%

Valuation and Earnings

This table compares Bank of the James Financial Group and First Community’s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bank of the James Financial Group	$41.85 million	1.46	$8.70 million	$1.95	6.85
First Community	$55.96 million	2.98	$11.84 million	$1.43	15.29

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

Summary

Bank of the James Financial Group beats First Community on 9 of the 16 factors compared between the two stocks.

About Bank of the James Financial Group

Bank of the James Financial Group, Inc. operates as the bank holding company for Bank of the James that provides general retail and commercial banking services to individuals, businesses, associations and organizations, and governmental authorities in Virginia, the United States. It offers checking, savings, individual retirement, and health care saving accounts, as well as other time deposits, including money market accounts and certificates of deposit. The company also provides loans to small- and medium-sized businesses for the purchases of equipment, facilities upgrades, inventory acquisition, and various working capital purposes; commercial and residential construction and development loans; commercial real estate mortgage loans; residential mortgage loans; and secured and unsecured consumer loans, such as lines of credit and overdraft lines of credit, as well as personal, automobile, installment, demand, and home equity loans for personal, family, or household purposes. In addition, it offers other banking services, including safe deposit boxes, traveler's checks, direct deposit of payroll and social security checks, automatic drafts for various accounts, treasury management, and credit card merchant services. Further, the company provides mortgage banking; investment advisory services; securities brokerage and investment services; and telephone and internet banking services comprising online bill pay, as well as acts as an agent for insurance and annuity products. The company was founded in 1999 and is headquartered in Lynchburg, Virginia.

About First Community

First Community Corporation operates as the bank holding company for First Community Bank that provides various commercial and retail banking products and services to small-to-medium sized businesses, professionals, and individuals. The company operates through Commercial and Retail Banking, Mortgage Banking, and Investment Advisory and Non-Deposit segments. Its deposit products include checking, NOW, savings, and individual retirement accounts; and demand deposits, as well as other time deposits, such as daily money market accounts and longer-term certificates of deposit. The company's loan portfolio comprises commercial loans that include secured and unsecured loans for working capital, business expansion, and the purchase of equipment and machinery; consumer loans, including secured and unsecured loans for financing automobiles, home improvements, education, and personal investments; real estate construction and acquisition loans; and fixed and variable rate mortgage loans. It also provides online banking, internet banking, cash management, safe deposit boxes, direct deposit of payroll and social security checks, and automatic drafts for various accounts. In addition, the company offers non-deposit investment products and other investment brokerage services; VISA and MasterCard credit card services; investment advisory services; and insurance services. The company was incorporated in 1994 and is headquartered in Lexington, South Carolina.