Meridian Bancorp (NASDAQ: EBSB) and Kearny Financial (NASDAQ:KRNY) are both small-cap finance companies, but which is the better stock? We will contrast the two companies based on the strength of their earnings, profitabiliy, institutional ownership, analyst recommendations, valuation, dividends and risk.

Profitability

This table compares Meridian Bancorp and Kearny Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Meridian Bancorp 20.81% 5.97% 0.84%
Kearny Financial 13.03% 1.71% 0.41%

Analyst Ratings

This is a breakdown of recent ratings and price targets for Meridian Bancorp and Kearny Financial, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Meridian Bancorp 0 2 1 0 2.33
Kearny Financial 1 0 1 0 2.00

Meridian Bancorp currently has a consensus price target of $19.67, suggesting a potential upside of 18.47%. Kearny Financial has a consensus price target of $15.00, suggesting a potential upside of 3.09%. Given Meridian Bancorp’s stronger consensus rating and higher possible upside, equities analysts plainly believe Meridian Bancorp is more favorable than Kearny Financial.

Earnings and Valuation

This table compares Meridian Bancorp and Kearny Financial’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Meridian Bancorp $135.37 million 6.25 $35.15 million $0.69 24.06
Kearny Financial $105.37 million 11.55 $17.56 million $0.21 69.29

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

Institutional and Insider Ownership

65.5% of Meridian Bancorp shares are held by institutional investors. Comparatively, 65.8% of Kearny Financial shares are held by institutional investors. 5.1% of Meridian Bancorp shares are held by insiders. Comparatively, 2.7% of Kearny Financial shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Risk & Volatility

Meridian Bancorp has a beta of 0.26, suggesting that its stock price is 74% less volatile than the S&P 500. Comparatively, Kearny Financial has a beta of 0.59, suggesting that its stock price is 41% less volatile than the S&P 500.

Dividends

Meridian Bancorp pays an annual dividend of $0.16 per share and has a dividend yield of 1.0%. Kearny Financial pays an annual dividend of $0.12 per share and has a dividend yield of 0.8%. Meridian Bancorp pays out 23.2% of its earnings in the form of a dividend. Kearny Financial pays out 57.1% 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. Meridian Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Meridian Bancorp beats Kearny Financial on 11 of the 15 factors compared between the two stocks.

About Meridian Bancorp

Meridian Bancorp Inc, formerly Meridian Interstate Bancorp, Inc., is a mid-tier stock holding company of East Boston Savings Bank (the Bank). The Bank is a state-chartered stock savings bank that operates from 24 full-service locations and two loan centers in the Boston metropolitan area. East Boston Savings Bank operates eight of its full-service locations and a loan center under the name Mt. Washington Bank, a division of East Boston Savings Bank. The Bank offers a variety of deposit and loan products to individuals and businesses located in its primary market, which consists of Suffolk, Middlesex and Essex Counties, Massachusetts. The Bank operates as a community-oriented financial institution offering financial services to consumers and businesses. As of December 31, 2011, Meridian Financial Services, Incorporated owned 59.4% interest of the Company.

About Kearny Financial

Kearny Bank is principally engaged in the business of attracting deposits from the general public at its 41 locations in New Jersey and using these deposits, together with other funds, to originate or purchase loans for its portfolio and invest in securities. Loans originated or purchased by the Bank generally include loans collateralized by residential and commercial real estate augmented by secured and unsecured loans to businesses and consumers. The investment securities purchased by the Bank generally include United States agency mortgage-backed securities, United States government and agency debentures and bank-qualified municipal obligations.

Receive News & Ratings for Meridian Bancorp Inc. Daily - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for Meridian Bancorp Inc. and related companies with MarketBeat.com's FREE daily email newsletter.