Financial Comparison: MainStreet Bank (NASDAQ:MNSB) & Arrow Financial (NASDAQ:AROW)

MainStreet Bank (NASDAQ:MNSB) and Arrow Financial (NASDAQ:AROW) are both small-cap finance companies, but which is the better stock? We will contrast the two companies based on the strength of their valuation, analyst recommendations, profitability, dividends, institutional ownership, risk and earnings.

Earnings & Valuation

This table compares MainStreet Bank and Arrow Financial”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MainStreet Bank	$135.62 million	1.29	$15.61 million	$1.76	12.90
Arrow Financial	$242.58 million	2.36	$43.95 million	$2.65	13.07

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

Risk & Volatility

MainStreet Bank has a beta of 0.56, meaning that its share price is 44% less volatile than the S&P 500. Comparatively, Arrow Financial has a beta of 0.78, meaning that its share price is 22% less volatile than the S&P 500.

Institutional and Insider Ownership

52.3% of MainStreet Bank shares are owned by institutional investors. Comparatively, 46.7% of Arrow Financial shares are owned by institutional investors. 9.3% of MainStreet Bank shares are owned by company insiders. Comparatively, 3.3% of Arrow Financial shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Dividends

MainStreet Bank pays an annual dividend of $0.40 per share and has a dividend yield of 1.8%. Arrow Financial pays an annual dividend of $1.20 per share and has a dividend yield of 3.5%. MainStreet Bank pays out 22.7% of its earnings in the form of a dividend. Arrow Financial pays out 45.3% 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. Arrow Financial has increased its dividend for 7 consecutive years. Arrow Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares MainStreet Bank and Arrow Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
MainStreet Bank	11.51%	8.32%	0.72%
Arrow Financial	18.12%	10.77%	1.00%

Analyst Ratings

This is a summary of current ratings and recommmendations for MainStreet Bank and Arrow Financial, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MainStreet Bank	1	1	0	0	1.50
Arrow Financial	0	2	1	0	2.33

Arrow Financial has a consensus target price of $31.25, suggesting a potential downside of 9.76%. Given Arrow Financial’s stronger consensus rating and higher probable upside, analysts plainly believe Arrow Financial is more favorable than MainStreet Bank.

Summary

Arrow Financial beats MainStreet Bank on 14 of the 17 factors compared between the two stocks.

About MainStreet Bank

MainStreet Bancshares, Inc. operates as the bank holding company for MainStreet Bank that provides various banking products and services for individuals, small to medium-sized businesses, and professional service organizations. The company offers demand, NOW, money market, savings, and sweep accounts, as well as certificates of deposit; business and consumer checking, interest-bearing checking, business account analysis, and other depository services; and cash management, wire transfer, check imaging, bill pay, remote deposit capture, and courier services. It also provides commercial loans, include government contract receivables, plant and equipment, general working capital, contract administration, and acquisition loans; commercial real estate, real estate construction, and residential real estate loans; and consumer loans comprising term loans and overdraft protection, as well as debit and credit cards. In addition, the company offers deposit insurance solutions; remote deposit of checks; and internet bill payment, online cash management, and online and mobile banking services. It operates in Herndon, Fairfax, McLean, Leesburg, Clarendon, and Washington D.C., as well as automated teller machines. The company was incorporated in 2003 and is headquartered in Fairfax, Virginia.

About Arrow Financial

Arrow Financial Corporation, a bank holding company, provides commercial and consumer banking, and financial products and services. The company’s deposit products include demand deposits, interest-bearing checking accounts, savings deposits, time deposits, and other time deposits. Its lending activities comprise commercial loans, such as term loans, time notes, and lines of credit; and commercial real estate loans to finance real estate purchases, refinancing, expansions, and enhancement to commercial properties, as well as commercial construction and land development loans to finance projects. The company’s lending activities also include consumer installment loans to finance personal expenditures, personal lines of credit, overdraft protection, and automobile loans; and residential real estate loans, fixed home equity loans, and home equity lines of credit for consumers to finance home improvements, debt consolidation, education, and other uses. In addition, it maintains an indirect lending program. Further, the company provides retirement planning, trust, and estate administration services for individuals, as well as pension, profit-sharing, and employee benefit plan administration services for corporations. Additionally, it offers insurance agency services comprising group health care policies and life insurance, and property and casualty insurance products; and investment advisory services to its proprietary mutual funds, as well as holds a real estate investment trust. It operates in the northeastern region of New York State in Warren, Washington, Saratoga, Essex, Clinton, Rensselaer, Albany, and Schenectady counties. Arrow Financial Corporation was founded in 1851 and is headquartered in Glens Falls, New York.