Critical Analysis: FS Bancorp (NASDAQ:FSBW) versus Summit State Bank (NASDAQ:SSBI)

FS Bancorp (NASDAQ:FSBW) and Summit State Bank (NASDAQ:SSBI) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their profitability, dividends, institutional ownership, earnings, risk, analyst recommendations and valuation.

Profitability

This table compares FS Bancorp and Summit State Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
FS Bancorp	15.10%	10.84%	1.04%
Summit State Bank	-1.41%	N/A	N/A

Analyst Recommendations

This is a summary of current ratings and target prices for FS Bancorp and Summit State Bank, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
FS Bancorp	0	1	1	0	2.50
Summit State Bank	1	0	0	0	1.00

FS Bancorp currently has a consensus target price of $41.00, suggesting a potential downside of 2.38%. Given FS Bancorp’s stronger consensus rating and higher probable upside, equities analysts clearly believe FS Bancorp is more favorable than Summit State Bank.

Valuation and Earnings

This table compares FS Bancorp and Summit State Bank”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
FS Bancorp	$153.96 million	2.05	$35.02 million	$4.10	10.24
Summit State Bank	$62.91 million	1.40	-$3.66 million	($0.13)	-99.85

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

Institutional & Insider Ownership

63.9% of FS Bancorp shares are owned by institutional investors. 12.7% of FS Bancorp shares are owned 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.

Risk and Volatility

FS Bancorp has a beta of 0.72, suggesting that its share price is 28% less volatile than the S&P 500. Comparatively, Summit State Bank has a beta of 0.18, suggesting that its share price is 82% less volatile than the S&P 500.

Summary

FS Bancorp beats Summit State Bank on 14 of the 14 factors compared between the two stocks.

About FS Bancorp

FS Bancorp, Inc. operates as a bank holding company for 1st Security Bank of Washington that provides banking and financial services to local families, local and regional businesses, and industry niches. The company operates in two segments, Commercial and Consumer Banking; and Home Lending. It offers various deposit instruments, including checking accounts, money market deposit accounts, savings accounts, and certificates of deposit. The company provides one-to-four-family residential first mortgages, second mortgage/home equity loan products, non-mortgage commercial business loans, commercial real estate loans, and construction and development loans, as well as consumer loans, which primarily include personal lines of credit, credit cards, automobile, direct home improvement, loans on deposit, and recreational loans. It operates full bank service branches and home loan production offices in suburban communities in the greater Puget Sound area, including Snohomish, King, Pierce, Jefferson, Kitsap, Clallam, Grays Harbor, and Thurston counties; and a loan production office in the market area of the Tri-Cities. FS Bancorp, Inc. was founded in 1936 and is headquartered in Mountlake Terrace, Washington.

About Summit State Bank

Summit State Bank engages in providing an array of financial services to small and medium-sized businesses, their owners and employees, entrepreneurs, high net worth families, foundations, estates, and individual consumers. It specializes in business services, personal accounts, nonprofit programs, and mobile banking ranging from lending, checking, merchant, eBanking, automated teller machines, equity loans, and others. The company was founded on December 20, 1982 and is headquartered in Santa Rosa, CA.