Critical Survey: Merchants Bancorp (NASDAQ:MBIN) & Unity Bancorp (NASDAQ:UNTY)

Merchants Bancorp (NASDAQ:MBIN) and Unity Bancorp (NASDAQ:UNTY) are both finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their risk, analyst recommendations, dividends, profitability, valuation, institutional ownership and earnings.

Valuation & Earnings

This table compares Merchants Bancorp and Unity Bancorp”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Merchants Bancorp	$1.37 billion	1.65	$218.77 million	$4.10	11.97
Unity Bancorp	$188.41 million	2.95	$57.95 million	$5.94	9.33

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

Volatility and Risk

Merchants Bancorp has a beta of 1.14, indicating that its stock price is 14% more volatile than the S&P 500. Comparatively, Unity Bancorp has a beta of 0.61, indicating that its stock price is 39% less volatile than the S&P 500.

Institutional & Insider Ownership

24.6% of Merchants Bancorp shares are held by institutional investors. Comparatively, 42.3% of Unity Bancorp shares are held by institutional investors. 44.9% of Merchants Bancorp shares are held by insiders. Comparatively, 28.9% of Unity Bancorp shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Dividends

Merchants Bancorp pays an annual dividend of $0.44 per share and has a dividend yield of 0.9%. Unity Bancorp pays an annual dividend of $0.64 per share and has a dividend yield of 1.2%. Merchants Bancorp pays out 10.7% of its earnings in the form of a dividend. Unity Bancorp pays out 10.8% 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. Merchants Bancorp has raised its dividend for 8 consecutive years and Unity Bancorp has raised its dividend for 12 consecutive years. Unity Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Merchants Bancorp and Unity Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Merchants Bancorp	16.64%	13.40%	1.17%
Unity Bancorp	31.33%	16.06%	1.85%

Analyst Recommendations

This is a summary of current ratings and target prices for Merchants Bancorp and Unity Bancorp, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Merchants Bancorp	0	2	3	0	2.60
Unity Bancorp	0	0	5	0	3.00

Merchants Bancorp currently has a consensus target price of $50.50, suggesting a potential upside of 2.87%. Unity Bancorp has a consensus target price of $64.75, suggesting a potential upside of 16.81%. Given Unity Bancorp’s stronger consensus rating and higher probable upside, analysts clearly believe Unity Bancorp is more favorable than Merchants Bancorp.

Summary

Unity Bancorp beats Merchants Bancorp on 11 of the 17 factors compared between the two stocks.

About Merchants Bancorp

Merchants Bancorp operates as the diversified bank holding company in the United States. It operates through three segments: Multi-family Mortgage Banking, Mortgage Warehousing, and Banking. The Multi-family Mortgage Banking segment engages in the mortgage banking, which originates and services government sponsored mortgages, including bridge financing products to refinance, acquire, or reposition multi-family housing projects, and construction lending for multi-family and healthcare facilities. This segment also offers customized loan products for need-based skilled nursing facilities, such as independent living, assisted living, and memory care; and tax credit equity syndicator service. The Mortgage Warehousing segment funds agency eligible residential loans, as well as commercial loans to non-depository financial institutions. The Banking segment offers a range of financial products and services to consumers and businesses, which includes retail banking, commercial lending, agricultural lending, retail and correspondent residential mortgage banking, and small business administration lending. Merchants Bancorp was founded in 1990 and is headquartered in Carmel, Indiana.

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.