Contrasting Orrstown Financial Services (NASDAQ:ORRF) & Horizon Bancorp (NASDAQ:HBNC)

Orrstown Financial Services (NASDAQ:ORRF) and Horizon Bancorp (NASDAQ:HBNC) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, dividends, earnings, risk, institutional ownership, profitability and analyst recommendations.

Analyst Ratings

This is a summary of recent ratings and target prices for Orrstown Financial Services and Horizon Bancorp, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Orrstown Financial Services	0	0	3	0	3.00
Horizon Bancorp	0	2	2	0	2.50

Orrstown Financial Services presently has a consensus price target of $35.33, indicating a potential downside of 5.15%. Horizon Bancorp has a consensus price target of $16.00, indicating a potential downside of 2.56%. Given Horizon Bancorp’s higher possible upside, analysts clearly believe Horizon Bancorp is more favorable than Orrstown Financial Services.

Profitability

This table compares Orrstown Financial Services and Horizon Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Orrstown Financial Services	6.63%	17.66%	1.52%
Horizon Bancorp	5.89%	8.36%	0.76%

Insider and Institutional Ownership

44.3% of Orrstown Financial Services shares are held by institutional investors. Comparatively, 64.5% of Horizon Bancorp shares are held by institutional investors. 6.2% of Orrstown Financial Services shares are held by company insiders. Comparatively, 2.8% of Horizon Bancorp shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares Orrstown Financial Services and Horizon Bancorp”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Orrstown Financial Services	$175.55 million	4.11	$35.66 million	$1.86	20.03
Horizon Bancorp	$324.30 million	2.21	$27.98 million	$0.47	34.94

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

Dividends

Orrstown Financial Services pays an annual dividend of $0.92 per share and has a dividend yield of 2.5%. Horizon Bancorp pays an annual dividend of $0.64 per share and has a dividend yield of 3.9%. Orrstown Financial Services pays out 49.5% of its earnings in the form of a dividend. Horizon Bancorp pays out 136.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Horizon Bancorp has raised its dividend for 13 consecutive years. Horizon Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Orrstown Financial Services has a beta of 0.89, indicating that its stock price is 11% less volatile than the S&P 500. Comparatively, Horizon Bancorp has a beta of 1.03, indicating that its stock price is 3% more volatile than the S&P 500.

Summary

Orrstown Financial Services beats Horizon Bancorp on 10 of the 17 factors compared between the two stocks.

About Orrstown Financial Services

Orrstown Financial Services, Inc. operates as the financial holding company for Orrstown Bank that provides commercial banking and financial advisory services to retail, commercial, non-profit, and government clients in the United States. It accepts various deposits, including checking, savings, time, demand, and money market deposits, as well as certificates of deposit. The company also offers commercial loans, such as commercial real estate, equipment, construction, working capital, and other commercial purpose loans, as well as industrial loans; consumer loans, such as home equity and other consumer loans, as well as home equity lines of credit; residential mortgage loans; acquisition and development loans; municipal loans; and installment and other loans. In addition, it provides renders services as trustee, executor, administrator, guardian, managing agent, custodian, and investment advisor, as well as other fiduciary services under the Orrstown Financial Advisors name; and retail brokerage services through a third-party broker/dealer arrangement. Further, the company offers fiduciary, investment advisory, insurance, and brokerage services. Orrstown Financial Services, Inc. was founded in 1919 and is headquartered in Shippensburg, Pennsylvania.

About Horizon Bancorp

Horizon Bancorp, Inc. operates as the bank holding company for Horizon Bank that engages in the provision of commercial and retail banking services. The company offers checking, saving, money market, certificate of deposits, individual retirement accounts, and time deposits, as well as non-interest- and interest-bearing demand deposits. It also provides commercial, residential real estate, mortgage, home equity, auto, personal, business, agricultural, and SBA loans, as well as credit cards. In addition, the company offers corporate and individual trust and agency, investment management, and real estate investment trust services; debit cards; treasury management; online and mobile banking; wealth, retirement, and estate and trust services; and sells various insurance products. It operates through full-service offices in northern and central Indiana and southern and central Michigan. Horizon Bancorp, Inc. was founded in 1873 and is headquartered in Michigan City, Indiana.