Critical Review: Northpointe Bancshares (NYSE:NPB) vs. Broadway Financial (NASDAQ:BYFC)

Broadway Financial (NASDAQ:BYFC) and Northpointe Bancshares (NYSE:NPB) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their valuation, earnings, profitability, dividends, risk, analyst recommendations and institutional ownership.

Analyst Recommendations

This is a summary of current recommendations and price targets for Broadway Financial and Northpointe Bancshares, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Broadway Financial	1	0	0	0	1.00
Northpointe Bancshares	1	1	2	0	2.25

Northpointe Bancshares has a consensus target price of $19.08, suggesting a potential upside of 1.02%. Given Northpointe Bancshares’ stronger consensus rating and higher possible upside, analysts plainly believe Northpointe Bancshares is more favorable than Broadway Financial.

Valuation and Earnings

This table compares Broadway Financial and Northpointe Bancshares”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Broadway Financial	$63.76 million	1.22	$1.93 million	($0.13)	-64.92
Northpointe Bancshares	$471.18 million	1.38	$55.16 million	$1.57	12.03

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

Institutional and Insider Ownership

12.1% of Broadway Financial shares are owned by institutional investors. 4.1% of Broadway Financial shares are owned by company insiders. Comparatively, 18.4% of Northpointe Bancshares shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Broadway Financial and Northpointe Bancshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Broadway Financial	3.18%	1.46%	0.15%
Northpointe Bancshares	17.70%	13.79%	1.31%

Summary

Northpointe Bancshares beats Broadway Financial on 12 of the 13 factors compared between the two stocks.

About Broadway Financial

Broadway Financial Corporation operates as the holding company for City First Bank, National Association that provides various banking products and services in the United States. It accepts various deposit accounts, including savings accounts, checking accounts, interest checking accounts, money market accounts, and fixed-term certificates of deposit. The company also offers mortgage loans, which are secured by multi-family residential properties; single family residential properties; and commercial real estate, including charter schools, community facilities, and churches, as well as commercial business, construction, and consumer loans. In addition, it invests in securities issued by federal government agencies, residential mortgage-backed securities, and other investments. The company was founded in 1946 and is headquartered in Los Angeles, California.

About Northpointe Bancshares

Northpointe Bancshares, Inc. operates as a bank holding company. It offers a nationwide mortgage purchase program, residential mortgage loans, digital deposit banking to retail customers and custodial deposit services. The company was founded by Charles A. Williams in 1998 and is headquartered in Grand Rapids, MI.