Critical Survey: Unity Bancorp (NASDAQ:UNTY) versus Provident Financial (NASDAQ:PROV)

Unity Bancorp (NASDAQ:UNTY) and Provident Financial (NASDAQ:PROV) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, institutional ownership, valuation, risk and profitability.

Earnings & Valuation

This table compares Unity Bancorp and Provident Financial”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Unity Bancorp	$134.79 million	4.38	$57.95 million	$5.75	10.22
Provident Financial	$59.62 million	1.95	$6.66 million	$1.03	18.15

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

Insider & Institutional Ownership

42.3% of Unity Bancorp shares are held by institutional investors. Comparatively, 71.3% of Provident Financial shares are held by institutional investors. 28.9% of Unity Bancorp shares are held by insiders. Comparatively, 11.5% of Provident Financial shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Volatility and Risk

Unity Bancorp has a beta of 0.61, suggesting that its stock price is 39% less volatile than the S&P 500. Comparatively, Provident Financial has a beta of 0.33, suggesting that its stock price is 67% less volatile than the S&P 500.

Dividends

Unity Bancorp pays an annual dividend of $0.68 per share and has a dividend yield of 1.2%. Provident Financial pays an annual dividend of $0.56 per share and has a dividend yield of 3.0%. Unity Bancorp pays out 11.8% of its earnings in the form of a dividend. Provident Financial pays out 54.4% 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. Unity Bancorp has increased its dividend for 12 consecutive years.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Unity Bancorp and Provident Financial, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Unity Bancorp	0	0	5	1	3.17
Provident Financial	0	2	0	1	2.67

Unity Bancorp currently has a consensus price target of $65.50, indicating a potential upside of 11.45%. Provident Financial has a consensus price target of $18.00, indicating a potential downside of 3.69%. Given Unity Bancorp’s stronger consensus rating and higher probable upside, research analysts clearly believe Unity Bancorp is more favorable than Provident Financial.

Profitability

This table compares Unity Bancorp and Provident Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Unity Bancorp	30.26%	16.10%	1.88%
Provident Financial	11.16%	5.23%	0.54%

Summary

Unity Bancorp beats Provident Financial on 14 of the 17 factors compared between the two stocks.

About Unity Bancorp

Unity Bancorp, Inc. operates as a bank holding company for Unity Bank that provides range of commercial and retail banking services to individuals, small and medium sized businesses, and professional communities. It offers personal and business checking accounts, time deposits, money market accounts, savings accounts, and retirement accounts, as well as noninterest and interest-bearing demand deposits. The company also provides small business administration loans; commercial loans; and residential mortgage and consumer loans, including residential real estate, home equity lines and loans, and residential construction lines, as well as personal loans. In addition, it offers credit and debit cards, wire transfer, safe deposit box, automated teller, and internet and mobile banking services; and automated clearing house origination and remote deposit capture services. Unity Bancorp, Inc. was incorporated in 1991 and is headquartered in Clinton, New Jersey.

About Provident Financial

Provident Financial Holdings, Inc. operates as the holding company for Provident Savings Bank, F.S.B. that provides community banking services to consumers and small to mid-sized businesses in the Inland Empire region of Southern California. The company's deposit products include checking, savings, and money market accounts, as well as time deposits; and loan portfolio consists of single-family, multi-family, commercial real estate, construction, mortgage, commercial business, and consumer loans. It also offers investment services comprising the sale of investment products, such as annuities and mutual funds; and trustee services for real estate transactions. The company operates through full-service banking offices in Riverside County and San Bernardino County. Provident Financial Holdings, Inc. was founded in 1956 and is headquartered in Riverside, California.