Financial Analysis: Live Oak Bancshares (NYSE:LOB) vs. City (NASDAQ:CHCO)

Live Oak Bancshares (NYSE:LOB) and City (NASDAQ:CHCO) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, valuation, risk, analyst recommendations, earnings, dividends and profitability.

Risk & Volatility

Live Oak Bancshares has a beta of 1.79, suggesting that its share price is 79% more volatile than the S&P 500. Comparatively, City has a beta of 0.49, suggesting that its share price is 51% less volatile than the S&P 500.

Institutional and Insider Ownership

64.0% of Live Oak Bancshares shares are owned by institutional investors. Comparatively, 72.4% of City shares are owned by institutional investors. 22.4% of Live Oak Bancshares shares are owned by company insiders. Comparatively, 1.8% of City shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Live Oak Bancshares pays an annual dividend of $0.12 per share and has a dividend yield of 0.3%. City pays an annual dividend of $4.00 per share and has a dividend yield of 2.8%. Live Oak Bancshares pays out 4.3% of its earnings in the form of a dividend. City pays out 43.7% 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. City has increased its dividend for 6 consecutive years. City is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Live Oak Bancshares and City’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Live Oak Bancshares	12.22%	11.49%	0.87%
City	32.31%	16.22%	1.93%

Earnings & Valuation

This table compares Live Oak Bancshares and City”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Live Oak Bancshares	$1.04 billion	1.53	$105.87 million	$2.81	12.24
City	$398.98 million	5.03	$130.49 million	$9.16	15.60

City has lower revenue, but higher earnings than Live Oak Bancshares. Live Oak Bancshares is trading at a lower price-to-earnings ratio than City, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Live Oak Bancshares and City, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Live Oak Bancshares	0	4	2	0	2.33
City	0	3	1	1	2.60

Live Oak Bancshares presently has a consensus target price of $41.75, indicating a potential upside of 21.42%. City has a consensus target price of $140.00, indicating a potential downside of 2.04%. Given Live Oak Bancshares’ higher possible upside, equities research analysts plainly believe Live Oak Bancshares is more favorable than City.

Summary

City beats Live Oak Bancshares on 12 of the 18 factors compared between the two stocks.

About Live Oak Bancshares

Live Oak Bancshares, Inc. is a financial holding company headquartered in Wilmington, North Carolina. Its principal subsidiary, Live Oak Bank, provides banking and lending services to small businesses and operates primarily through digital channels. The bank specializes in small-business lending, including U.S. Small Business Administration loans and other commercial financing. It serves businesses in a range of industries, such as healthcare, agriculture, veterinary services and other specialized sectors, and also offers deposit accounts and cash-management services.

About City

City Holding Company (NASDAQ: CHCO) is a financial holding company headquartered in Charleston, West Virginia. Its principal subsidiary, City National Bank of West Virginia, provides banking and related financial services to individuals, businesses and organizations. The bank offers deposit accounts, consumer and commercial lending, mortgage services, and online and mobile banking. It also provides wealth management, trust and investment services, and insurance through its affiliated businesses.