Investors Bancorp (NASDAQ: ISBC) and Meridian Bancorp (NASDAQ:EBSB) are both finance companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, analyst recommendations, earnings, risk, profitabiliy, valuation and institutional ownership.

Institutional & Insider Ownership

76.1% of Investors Bancorp shares are held by institutional investors. Comparatively, 65.5% of Meridian Bancorp shares are held by institutional investors. 3.0% of Investors Bancorp shares are held by company insiders. Comparatively, 5.1% of Meridian Bancorp shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Risk and Volatility

Investors Bancorp has a beta of 0.71, indicating that its stock price is 29% less volatile than the S&P 500. Comparatively, Meridian Bancorp has a beta of 0.26, indicating that its stock price is 74% less volatile than the S&P 500.

Valuation and Earnings

This table compares Investors Bancorp and Meridian Bancorp’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Investors Bancorp $672.19 million 5.77 $190.52 million $0.64 20.34
Meridian Bancorp $135.37 million 6.25 $35.15 million $0.69 24.06

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

Profitability

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

Net Margins Return on Equity Return on Assets
Investors Bancorp 21.92% 5.95% 0.82%
Meridian Bancorp 20.81% 5.97% 0.84%

Dividends

Investors Bancorp pays an annual dividend of $0.32 per share and has a dividend yield of 2.5%. Meridian Bancorp pays an annual dividend of $0.16 per share and has a dividend yield of 1.0%. Investors Bancorp pays out 50.0% of its earnings in the form of a dividend. Meridian Bancorp pays out 23.2% 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.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Investors Bancorp and Meridian Bancorp, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Investors Bancorp 1 1 4 0 2.50
Meridian Bancorp 0 2 1 0 2.33

Investors Bancorp presently has a consensus target price of $14.75, suggesting a potential upside of 13.29%. Meridian Bancorp has a consensus target price of $19.67, suggesting a potential upside of 18.47%. Given Meridian Bancorp’s higher probable upside, analysts plainly believe Meridian Bancorp is more favorable than Investors Bancorp.

Investors Bancorp Company Profile

Investors Bancorp, Inc. is a holding company for Investors Bank (the Bank). The Bank is a chartered savings bank. The Company is in the business of attracting deposits from the public through its branch network and borrowing funds in the wholesale markets to originate loans and to invest in securities. It originates mortgage loans secured by one-to four-family residential real estate loans, multi-family loans, commercial real estate loans, construction loans, commercial and industrial loans and consumer loans, the majority of which are home equity loans and home equity lines of credit. Securities, primarily United States Government and Federal Agency obligations, mortgage-backed and other securities represented 12.3% of its assets as of December 31, 2012. In December 2013, Investors Bancorp Inc completed its acquisition of Roma Financial Corp, and its subsidiary banks, Roma Bank and RomAsia Bank. In January 2014, Investors Bancorp Inc acquired Gateway Community Financial Corp.

Meridian Bancorp Company Profile

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.

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