Analyzing Orrstown Financial Services (NASDAQ:ORRF) & First United (NASDAQ:FUNC)

First United (NASDAQ:FUNC) and Orrstown Financial Services (NASDAQ:ORRF) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, earnings, dividends, profitability, risk, institutional ownership and analyst recommendations.

Analyst Ratings

This is a breakdown of current ratings and price targets for First United and Orrstown Financial Services, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First United	0	0	1	0	3.00
Orrstown Financial Services	0	1	3	0	2.75

Orrstown Financial Services has a consensus target price of $42.00, indicating a potential upside of 9.23%. Given Orrstown Financial Services’ higher probable upside, analysts clearly believe Orrstown Financial Services is more favorable than First United.

Risk & Volatility

First United has a beta of 0.53, suggesting that its share price is 47% less volatile than the S&P 500. Comparatively, Orrstown Financial Services has a beta of 0.77, suggesting that its share price is 23% less volatile than the S&P 500.

Profitability

This table compares First United and Orrstown Financial Services’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First United	20.19%	13.33%	1.28%
Orrstown Financial Services	22.71%	14.77%	1.52%

Earnings & Valuation

This table compares First United and Orrstown Financial Services”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First United	$88.87 million	2.76	$24.51 million	$3.77	10.02
Orrstown Financial Services	$356.05 million	2.12	$80.86 million	$4.18	9.20

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

Institutional and Insider Ownership

33.3% of First United shares are owned by institutional investors. Comparatively, 44.3% of Orrstown Financial Services shares are owned by institutional investors. 7.9% of First United shares are owned by insiders. Comparatively, 4.3% of Orrstown Financial Services shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Dividends

First United pays an annual dividend of $1.04 per share and has a dividend yield of 2.8%. Orrstown Financial Services pays an annual dividend of $1.20 per share and has a dividend yield of 3.1%. First United pays out 27.6% of its earnings in the form of a dividend. Orrstown Financial Services pays out 28.7% 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. First United has increased its dividend for 6 consecutive years and Orrstown Financial Services has increased its dividend for 10 consecutive years. Orrstown Financial Services is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Orrstown Financial Services beats First United on 12 of the 17 factors compared between the two stocks.

About First United

First United Corporation operates as the bank holding company for First United Bank & Trust that provides various retail and commercial banking services to businesses and individuals. It offers various deposit products, which includes checking, savings, money market deposit, and regular and individual retirement accounts (IRAs), as well as certificates of deposit. The company loan portfolio includes commercial loans secured by real estate, commercial equipment, vehicles, or other assets of the borrower; commercial real estate loans for residential and commercial development, agricultural purpose properties, and service industry buildings, such as restaurants and motels, retail buildings, and general purpose business space; residential mortgage loans; home equity lines of credit; residential real estate construction loans; and indirect and direct auto loans, student loans, and other secured and unsecured lines of credit and term loans. It also offers access to multi-million-dollar certificates of deposit and the Intrafi cash service, including multi-million-dollar savings and demand deposits to municipalities, businesses, and consumers; and treasury management, cash sweep, and various checking services. In addition, the company provides trust services, which includes personal trust, investment agency accounts, charitable trusts, retirement accounts, including IRA roll-overs, 401(k) accounts and defined benefit plans, estate administration, and estate planning; and insurance products, brokerage services, and safe deposit and night depository facilities. First United Corporation was founded in 1900 and is headquartered in Oakland, Maryland.

About Orrstown Financial Services

Orrstown Financial Services, Inc. operates as the financial holding company for Orrstown Bank that provides commercial banking and financial advisory services to retail, commercial, non-profit, and government clients in the United States. It accepts various deposits, including checking, savings, time, demand, and money market deposits, as well as certificates of deposit. The company also offers commercial loans, such as commercial real estate, equipment, construction, working capital, and other commercial purpose loans, as well as industrial loans; consumer loans, such as home equity and other consumer loans, as well as home equity lines of credit; residential mortgage loans; acquisition and development loans; municipal loans; and installment and other loans. In addition, it provides renders services as trustee, executor, administrator, guardian, managing agent, custodian, and investment advisor, as well as other fiduciary services under the Orrstown Financial Advisors name; and retail brokerage services through a third-party broker/dealer arrangement. Further, the company offers fiduciary, investment advisory, insurance, and brokerage services. Orrstown Financial Services, Inc. was founded in 1919 and is headquartered in Shippensburg, Pennsylvania.