Critical Analysis: Waterstone Financial (NASDAQ:WSBF) & Eagle Bancorp Montana (NASDAQ:EBMT)

Waterstone Financial (NASDAQ:WSBF) and Eagle Bancorp Montana (NASDAQ:EBMT) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, earnings, valuation, institutional ownership, risk, profitability and analyst recommendations.

Insider and Institutional Ownership

62.7% of Waterstone Financial shares are held by institutional investors. Comparatively, 35.7% of Eagle Bancorp Montana shares are held by institutional investors. 6.0% of Waterstone Financial shares are held by company insiders. Comparatively, 5.8% of Eagle Bancorp Montana shares are held 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.

Profitability

This table compares Waterstone Financial and Eagle Bancorp Montana’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Waterstone Financial	14.57%	8.64%	1.33%
Eagle Bancorp Montana	12.57%	8.36%	0.76%

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Waterstone Financial and Eagle Bancorp Montana, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Waterstone Financial	0	0	1	0	3.00
Eagle Bancorp Montana	0	3	0	1	2.50

Eagle Bancorp Montana has a consensus price target of $23.50, suggesting a potential upside of 9.15%. Given Eagle Bancorp Montana’s higher possible upside, analysts clearly believe Eagle Bancorp Montana is more favorable than Waterstone Financial.

Earnings and Valuation

This table compares Waterstone Financial and Eagle Bancorp Montana”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Waterstone Financial	$201.29 million	1.82	$26.40 million	$1.72	11.85
Eagle Bancorp Montana	$127.08 million	1.35	$14.84 million	$2.04	10.55

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

Dividends

Waterstone Financial pays an annual dividend of $0.68 per share and has a dividend yield of 3.3%. Eagle Bancorp Montana pays an annual dividend of $0.59 per share and has a dividend yield of 2.7%. Waterstone Financial pays out 39.5% of its earnings in the form of a dividend. Eagle Bancorp Montana pays out 28.9% 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. Eagle Bancorp Montana has increased its dividend for 14 consecutive years.

Risk and Volatility

Waterstone Financial has a beta of 0.71, indicating that its share price is 29% less volatile than the S&P 500. Comparatively, Eagle Bancorp Montana has a beta of 0.35, indicating that its share price is 65% less volatile than the S&P 500.

Summary

Waterstone Financial beats Eagle Bancorp Montana on 13 of the 18 factors compared between the two stocks.

About Waterstone Financial

Waterstone Financial, Inc. operates as a bank holding company for WaterStone Bank SSB that provides various financial services to customers in southeastern Wisconsin, the United States. It operates in two segments, Community Banking and Mortgage Banking. The Community Banking segment offers consumer and business banking products and services, such as deposit and transactional solutions, including checking accounts, online banking and bill pay services, money transfer services, as well as credit, debit, and pre-paid cards; investable funds solutions comprising savings, money market deposits, individual retirement accounts, and certificates of deposit; residential mortgages, home equity loans and lines of credit, personal and installment loans, real estate financing, business loans, and business lines of credit; and fixed and variable annuities, insurance products, and trust and investment management accounts. It also provides transaction deposits, interest bearing transaction accounts, demand deposits, non-interest-bearing demand accounts, and time deposits; secured and unsecured lines; commercial real estate construction loans; term loans for working capital, inventory, and general corporate use; and personal term loans and investment services. The Mortgage Banking segment offers residential mortgage loans for the purpose of sale in the secondary market. It also invests in a portfolio of securities include mortgage-backed securities, government-sponsored and private-label enterprise bonds, collateralized mortgage and municipal obligations, and other debt securities. The company was formerly known as Wauwatosa Holdings, Inc. and changed its name to Waterstone Financial, Inc. in August 2008. The company was founded in 1921 and is based in Wauwatosa, Wisconsin.

About Eagle Bancorp Montana

Eagle Bancorp Montana, Inc. operates as the bank holding company for Opportunity Bank of Montana that provides various retail banking products and services to small businesses and individuals in Montana. It accepts various deposit products, such as checking, savings, money market, and individual retirement accounts, as well as certificates of deposit accounts. The company also provides 1-4 family residential mortgage loans, such as residential mortgages and construction of residential properties; commercial real estate loans, including multi-family dwellings, nonresidential property, commercial construction and development, and farmland loans; and second mortgage/home equity loans. In addition, it offers consumer loans, such as loans secured by collateral other than real estate, such as automobiles, recreational vehicles, and boats; personal loans and lines of credit; commercial business loans consisting of business loans and lines of credit on a secured and unsecured basis; construction loans; agricultural loans; and mortgage loan services. The company operates full-service branches and automated teller machines. Eagle Bancorp Montana, Inc. was founded in 1922 and is headquartered in Helena, Montana.