Live Oak Bancshares (NASDAQ: LOB) and United Community Banks (NASDAQ:UCBI) are both small-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, profitability, institutional ownership, earnings, dividends, risk and analyst recommendations.

Profitability

This table compares Live Oak Bancshares and United Community Banks’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Live Oak Bancshares 13.71% 11.50% 1.37%
United Community Banks 23.07% 10.42% 1.07%

Dividends

Live Oak Bancshares pays an annual dividend of $0.12 per share and has a dividend yield of 0.5%. United Community Banks pays an annual dividend of $0.36 per share and has a dividend yield of 1.4%. Live Oak Bancshares pays out 17.1% of its earnings in the form of a dividend. United Community Banks pays out 24.7% 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.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Live Oak Bancshares and United Community Banks, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Live Oak Bancshares 0 0 0 0 N/A
United Community Banks 0 2 3 1 2.83

United Community Banks has a consensus price target of $30.83, indicating a potential upside of 17.81%. Given United Community Banks’ higher probable upside, analysts plainly believe United Community Banks is more favorable than Live Oak Bancshares.

Earnings & Valuation

This table compares Live Oak Bancshares and United Community Banks’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Live Oak Bancshares $151.53 million 5.17 $24.26 million $0.70 32.29
United Community Banks $424.67 million 4.37 $103.63 million $1.46 17.93

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

Insider and Institutional Ownership

37.8% of Live Oak Bancshares shares are owned by institutional investors. Comparatively, 89.7% of United Community Banks shares are owned by institutional investors. 30.1% of Live Oak Bancshares shares are owned by company insiders. Comparatively, 2.2% of United Community Banks shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Risk & Volatility

Live Oak Bancshares has a beta of -0.15, meaning that its stock price is 115% less volatile than the S&P 500. Comparatively, United Community Banks has a beta of 0.88, meaning that its stock price is 12% less volatile than the S&P 500.

Summary

United Community Banks beats Live Oak Bancshares on 10 of the 16 factors compared between the two stocks.

About Live Oak Bancshares

Live Oak Bancshares, Inc. is a bank holding company. The Company conducts business operations primarily through its commercial bank subsidiary, Live Oak Banking Company (the Bank). The Bank specializes in providing lending services to small businesses nationwide in targeted industries. The loans originated by the Bank are guaranteed by the small business administration (SBA). The Company’s loan portfolio includes commercial and industrial loans; construction and development loans; commercial real estate, and commercial land. The Company’s investment securities include the United States Government agencies, residential mortgage-backed securities and mutual fund. The Company’s deposits include non-interest-bearing deposits and interest-bearing deposits, such as interest-bearing checking, money market and time deposits.

About United Community Banks

United Community Banks, Inc. (United) is a bank holding company. United conducts its operations through a community-focused operating model of separate community banks, which, as of December 31, 2016, operated at 139 locations throughout the Atlanta-Sandy Springs-Roswell, Georgia, and Gainesville, Georgia metropolitan statistical areas, upstate and coastal South Carolina, north and coastal Georgia, western North Carolina, and east Tennessee. The community banks offer a range of retail and corporate banking services, including checking, savings and time deposit accounts, secured and unsecured loans, wire transfers, brokerage services and other financial services. The Company operates through its subsidiary, United Community Bank, Blairsville, Georgia (the Bank). The Bank owns an insurance agency, United Community Insurance Services, Inc., known as United Community Advisory Services, which is a subsidiary of the Bank.

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