Financial Analysis: Home Federal Bancorp, Inc. of Louisiana (NASDAQ:HFBL) vs. Meridian (NASDAQ:MRBK)

Home Federal Bancorp, Inc. of Louisiana (NASDAQ:HFBL) and Meridian (NASDAQ:MRBK) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, risk, earnings, valuation, analyst recommendations, dividends and institutional ownership.

Risk and Volatility

Home Federal Bancorp, Inc. of Louisiana has a beta of 0.41, suggesting that its share price is 59% less volatile than the S&P 500. Comparatively, Meridian has a beta of 0.65, suggesting that its share price is 35% less volatile than the S&P 500.

Insider & Institutional Ownership

21.1% of Home Federal Bancorp, Inc. of Louisiana shares are held by institutional investors. Comparatively, 58.6% of Meridian shares are held by institutional investors. 19.0% of Home Federal Bancorp, Inc. of Louisiana shares are held by company insiders. Comparatively, 14.1% of Meridian shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a summary of current recommendations and price targets for Home Federal Bancorp, Inc. of Louisiana and Meridian, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Home Federal Bancorp, Inc. of Louisiana	0	1	0	0	2.00
Meridian	1	0	3	0	2.50

Meridian has a consensus target price of $22.00, suggesting a potential upside of 17.65%. Given Meridian’s stronger consensus rating and higher possible upside, analysts plainly believe Meridian is more favorable than Home Federal Bancorp, Inc. of Louisiana.

Profitability

This table compares Home Federal Bancorp, Inc. of Louisiana and Meridian’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Home Federal Bancorp, Inc. of Louisiana	17.99%	11.15%	1.02%
Meridian	11.89%	12.29%	0.95%

Dividends

Home Federal Bancorp, Inc. of Louisiana pays an annual dividend of $0.60 per share and has a dividend yield of 2.6%. Meridian pays an annual dividend of $0.56 per share and has a dividend yield of 3.0%. Home Federal Bancorp, Inc. of Louisiana pays out 28.6% of its earnings in the form of a dividend. Meridian pays out 27.2% 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. Home Federal Bancorp, Inc. of Louisiana has raised its dividend for 11 consecutive years. Meridian is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Home Federal Bancorp, Inc. of Louisiana and Meridian”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Home Federal Bancorp, Inc. of Louisiana	$35.17 million	1.97	$6.17 million	$2.10	10.88
Meridian	$205.49 million	1.09	$21.84 million	$2.06	9.08

Meridian has higher revenue and earnings than Home Federal Bancorp, Inc. of Louisiana. Meridian is trading at a lower price-to-earnings ratio than Home Federal Bancorp, Inc. of Louisiana, indicating that it is currently the more affordable of the two stocks.

Summary

Meridian beats Home Federal Bancorp, Inc. of Louisiana on 10 of the 17 factors compared between the two stocks.

About Home Federal Bancorp, Inc. of Louisiana

Home Federal Bancorp, Inc. of Louisiana operates as the holding company for Home Federal Bank that provides various financial services to individuals, corporate entities, and other organizations. The company accepts various deposits, such as passbook savings, certificates of deposit, and demand deposit accounts. Its loan products include one-to-four family residential real estate loans; commercial real estate secured loans; multi-family residential loans; commercial business loans; land loans; construction loans; home equity and second mortgage loans; lines of credit; and consumer non-real estate loans, including loans secured by deposit accounts, automobile loans, overdrafts, and other unsecured loans. The company operates through branches in Shreveport, Bossier City, Minden, and Benton, Louisiana. The company was founded in 1924 and is based in Shreveport, Louisiana.

About Meridian

Meridian Corporation operates as the holding company for Meridian Bank that provides commercial banking products and services in Pennsylvania, New Jersey, Delaware, Florida, and Maryland. The company offers various deposit products, such as demand non-interest bearing, demand interest bearing, savings accounts, money market accounts, and time deposits. It also provides commercial and industrial loans comprising business lines of credit, term loans, small business lending, lease financing, shared national credits, and other financing; commercial real estate, and land development and construction loans for residential and commercial projects; and consumer and home equity lending, private banking, merchant, and title and land settlement services. In addition, the company operates and originates mortgage loans for 1-4 family dwellings; and offers real estate holding, investment advisory, and equipment leasing services, as well as financial planning and wealth management services. Meridian Corporation was incorporated in 2004 and is headquartered in Malvern, Pennsylvania.