Provident Financial (NASDAQ:PROV – Get Free Report) and Unity Bancorp (NASDAQ:UNTY – Get Free Report) are both small-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, valuation, dividends, analyst recommendations, earnings, profitability and risk.
Institutional and Insider Ownership
71.3% of Provident Financial shares are owned by institutional investors. Comparatively, 42.3% of Unity Bancorp shares are owned by institutional investors. 11.5% of Provident Financial shares are owned by company insiders. Comparatively, 28.9% of Unity Bancorp shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.
Profitability
This table compares Provident Financial and Unity Bancorp’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Provident Financial | 11.16% | 5.23% | 0.54% |
| Unity Bancorp | 30.26% | 16.10% | 1.88% |
Analyst Ratings
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Provident Financial | 0 | 2 | 0 | 1 | 2.67 |
| Unity Bancorp | 0 | 0 | 5 | 1 | 3.17 |
Provident Financial presently has a consensus price target of $18.00, suggesting a potential downside of 3.33%. Unity Bancorp has a consensus price target of $65.50, suggesting a potential upside of 9.66%. Given Unity Bancorp’s stronger consensus rating and higher possible upside, analysts plainly believe Unity Bancorp is more favorable than Provident Financial.
Earnings & Valuation
This table compares Provident Financial and Unity Bancorp”s top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Provident Financial | $40.05 million | 2.90 | $6.66 million | $1.03 | 18.08 |
| Unity Bancorp | $188.41 million | 3.18 | $57.95 million | $5.75 | 10.39 |
Unity Bancorp has higher revenue and earnings than Provident Financial. Unity Bancorp is trading at a lower price-to-earnings ratio than Provident Financial, indicating that it is currently the more affordable of the two stocks.
Dividends
Provident Financial pays an annual dividend of $0.56 per share and has a dividend yield of 3.0%. Unity Bancorp pays an annual dividend of $0.68 per share and has a dividend yield of 1.1%. Provident Financial pays out 54.4% of its earnings in the form of a dividend. Unity Bancorp pays out 11.8% 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. Unity Bancorp has increased its dividend for 12 consecutive years.
Risk and Volatility
Provident Financial has a beta of 0.33, meaning that its share price is 67% less volatile than the S&P 500. Comparatively, Unity Bancorp has a beta of 0.61, meaning that its share price is 39% less volatile than the S&P 500.
Summary
Unity Bancorp beats Provident Financial on 14 of the 17 factors compared between the two stocks.
About Provident Financial
Provident Financial Holdings, Inc. operates as the holding company for Provident Savings Bank, F.S.B. that provides community banking services to consumers and small to mid-sized businesses in the Inland Empire region of Southern California. The company's deposit products include checking, savings, and money market accounts, as well as time deposits; and loan portfolio consists of single-family, multi-family, commercial real estate, construction, mortgage, commercial business, and consumer loans. It also offers investment services comprising the sale of investment products, such as annuities and mutual funds; and trustee services for real estate transactions. The company operates through full-service banking offices in Riverside County and San Bernardino County. Provident Financial Holdings, Inc. was founded in 1956 and is headquartered in Riverside, California.
About Unity Bancorp
Unity Bancorp, Inc. operates as a bank holding company for Unity Bank that provides range of commercial and retail banking services to individuals, small and medium sized businesses, and professional communities. It offers personal and business checking accounts, time deposits, money market accounts, savings accounts, and retirement accounts, as well as noninterest and interest-bearing demand deposits. The company also provides small business administration loans; commercial loans; and residential mortgage and consumer loans, including residential real estate, home equity lines and loans, and residential construction lines, as well as personal loans. In addition, it offers credit and debit cards, wire transfer, safe deposit box, automated teller, and internet and mobile banking services; and automated clearing house origination and remote deposit capture services. Unity Bancorp, Inc. was incorporated in 1991 and is headquartered in Clinton, New Jersey.
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