Critical Comparison: Magyar Bancorp (NASDAQ:MGYR) and Norwood Financial (NASDAQ:NWFL)

Norwood Financial (NASDAQ:NWFL) and Magyar Bancorp (NASDAQ:MGYR) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, earnings, risk, dividends, institutional ownership and profitability.

Volatility and Risk

Norwood Financial has a beta of 0.56, meaning that its stock price is 44% less volatile than the S&P 500. Comparatively, Magyar Bancorp has a beta of 0.29, meaning that its stock price is 71% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings for Norwood Financial and Magyar Bancorp, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Norwood Financial	0	1	1	0	2.50
Magyar Bancorp	0	1	0	0	2.00

Norwood Financial presently has a consensus price target of $35.00, suggesting a potential upside of 3.46%. Given Norwood Financial’s stronger consensus rating and higher probable upside, analysts clearly believe Norwood Financial is more favorable than Magyar Bancorp.

Valuation and Earnings

This table compares Norwood Financial and Magyar Bancorp”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Norwood Financial	$136.15 million	2.71	$27.75 million	$2.90	11.67
Magyar Bancorp	$58.42 million	2.08	$9.76 million	$1.87	10.06

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

Dividends

Norwood Financial pays an annual dividend of $1.28 per share and has a dividend yield of 3.8%. Magyar Bancorp pays an annual dividend of $0.40 per share and has a dividend yield of 2.1%. Norwood Financial pays out 44.1% of its earnings in the form of a dividend. Magyar Bancorp pays out 21.4% 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. Norwood Financial has increased its dividend for 7 consecutive years and Magyar Bancorp has increased its dividend for 3 consecutive years. Norwood Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

28.1% of Norwood Financial shares are held by institutional investors. Comparatively, 46.3% of Magyar Bancorp shares are held by institutional investors. 8.1% of Norwood Financial shares are held by company insiders. Comparatively, 11.1% of Magyar Bancorp shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Norwood Financial	18.68%	12.88%	1.27%
Magyar Bancorp	18.89%	9.59%	1.13%

Summary

Norwood Financial beats Magyar Bancorp on 13 of the 17 factors compared between the two stocks.

About Norwood Financial

Norwood Financial Corp. operates as the bank holding company for Wayne Bank that provides various banking products and services. The company accepts a range of deposit products, including interest-bearing and non-interest-bearing transaction accounts, and statement savings and money market accounts, as well as certificate of deposits. It also provides commercial loans comprising lines of credit, revolving credit, term loans, mortgages, secured lending products, and letter of credit facilities; municipal finance lending; construction loans for commercial construction projects and single-family residences; land loans; construction financing; consumer loans; mortgage lending to finance principal residences and second home dwellings; and indirect dealer financing of new and used automobiles, boats, and recreational vehicles. In addition, the company offers investment securities services; personal and business credit services; trust and investment products; and cash management, direct deposit, remote deposit capture, mobile deposit capture, automated clearing house activity, real estate settlement, and Internet and mobile banking services. Further, it engages in the annuity and mutual fund sale, and discount brokerage activities, as well as insurance agency business. The company serves consumers, businesses, nonprofit organizations, and municipalities. It operates branches in Northeastern Pennsylvania; and in Delaware, Sullivan, Ontario, Otsego, and Yates Counties, New York, as well as automated teller machines. Norwood Financial Corp. was founded in 1870 and is headquartered in Honesdale, Pennsylvania.

About Magyar Bancorp

Magyar Bancorp, Inc. operates as the holding company for Magyar Bank that provides various consumer and commercial banking services to individuals, businesses, and nonprofit organizations in New Jersey, the United States. It accepts various deposit accounts, including demand, savings, NOW, money market, and retirement accounts, as well as certificates of deposit. The company also provides residential mortgage loans, multi-family and commercial real estate mortgage loans, home equity loans and lines of credit, commercial business loans, and construction loans, as well as small business administration loans. In addition, it offers non-deposit investment products and financial planning services, including insurance products, fixed and variable annuities, and retirement planning for individual and commercial customers; and buys, sells, and holds investment securities. The company has branch offices located in New Brunswick, North Brunswick, South Brunswick, Branchburg, Bridgewater, and Edison, New Jersey. Magyar Bancorp, Inc. was founded in 1922 and is headquartered in New Brunswick, New Jersey.