Critical Comparison: Shore Bancshares (NASDAQ:SHBI) versus SR Bancorp (NASDAQ:SRBK)

SR Bancorp (NASDAQ:SRBK) and Shore Bancshares (NASDAQ:SHBI) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, institutional ownership, valuation, risk, earnings, analyst recommendations and profitability.

Profitability

This table compares SR Bancorp and Shore Bancshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
SR Bancorp	7.70%	1.75%	0.32%
Shore Bancshares	15.98%	10.98%	0.99%

Analyst Ratings

This is a breakdown of current ratings and recommmendations for SR Bancorp and Shore Bancshares, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
SR Bancorp	0	1	0	0	2.00
Shore Bancshares	0	2	2	0	2.50

Shore Bancshares has a consensus price target of $20.00, suggesting a potential upside of 21.88%. Given Shore Bancshares’ stronger consensus rating and higher probable upside, analysts clearly believe Shore Bancshares is more favorable than SR Bancorp.

Institutional & Insider Ownership

24.7% of SR Bancorp shares are held by institutional investors. Comparatively, 59.8% of Shore Bancshares shares are held by institutional investors. 3.6% of SR Bancorp shares are held by company insiders. Comparatively, 8.6% of Shore Bancshares shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares SR Bancorp and Shore Bancshares”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
SR Bancorp	$48.54 million	2.65	$5.14 million	$0.44	33.59
Shore Bancshares	$326.48 million	1.68	$43.89 million	$1.61	10.19

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

Dividends

SR Bancorp pays an annual dividend of $0.20 per share and has a dividend yield of 1.4%. Shore Bancshares pays an annual dividend of $0.48 per share and has a dividend yield of 2.9%. SR Bancorp pays out 45.5% of its earnings in the form of a dividend. Shore Bancshares pays out 29.8% 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. Shore Bancshares is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk and Volatility

SR Bancorp has a beta of 0.57, suggesting that its share price is 43% less volatile than the S&P 500. Comparatively, Shore Bancshares has a beta of 1.1, suggesting that its share price is 10% more volatile than the S&P 500.

Summary

Shore Bancshares beats SR Bancorp on 14 of the 16 factors compared between the two stocks.

About SR Bancorp

SR Bancorp, Inc. operates as the holding company for Somerset Regal Bank that provides customary retail and commercial banking services to individuals, businesses, and local municipalities in the communities of Somerset, Middlesex, Hunterdon, and Essex counties in New Jersey. It offers deposit instruments, including noninterest-bearing demand deposits, interest-bearing demand accounts, savings accounts, money market accounts, and certificates of deposit. The company also provides loans comprising one- to four family-residential mortgage loans, home equity loans and lines of credit, unsecured personal loans, and rehabilitation loans; and bill payment services. In addition, it is involved in the investment activities. The company was founded in 1887 and is headquartered in Bound Brook, New Jersey.

About Shore Bancshares

Shore Bancshares, Inc. operates as a bank holding company for the Shore United Bank, N.A. that provides various commercial and consumer banking products and services to individuals, businesses, and other organizations. It offers checking, savings, overnight investment sweep, and money market accounts; and regular and IRA certificates of deposit, as well as CDARS programs and cash management services. The company also provides commercial loans, such as secured and unsecured loans, working capital loans, lines of credit, term loans, accounts receivable financing, real estate acquisition and development loans, construction loans, and letters of credit; residential real estate construction loans; residential mortgage loans; and loans to consumers, including home equity, automobile, installment, home improvement, and personal lines of credit, as well as other consumer financing products. In addition, it offers trust, asset management, and financial planning services; treasury management services, such as merchant card processing, remote deposit capture, and ACH origination, as well as telephone, mobile, and Internet banking services; safe deposit boxes; debit and credit cards; and automatic teller machine services. Shore Bancshares, Inc. was founded in 1876 and is headquartered in Easton, Maryland.