Critical Survey: Live Oak Bancshares (NASDAQ:LOB) & Washington Trust Bancorp (NASDAQ:WASH)

Live Oak Bancshares (NASDAQ:LOB) and Washington Trust Bancorp (NASDAQ:WASH) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their valuation, analyst recommendations, risk, profitability, earnings, institutional ownership and dividends.

Dividends

Live Oak Bancshares pays an annual dividend of $0.12 per share and has a dividend yield of 0.5%. Washington Trust Bancorp pays an annual dividend of $2.04 per share and has a dividend yield of 6.0%. Live Oak Bancshares pays out 27.3% of its earnings in the form of a dividend. Washington Trust Bancorp pays out 51.5% 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. Live Oak Bancshares has raised its dividend for 1 consecutive years and Washington Trust Bancorp has raised its dividend for 9 consecutive years. Washington Trust Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Live Oak Bancshares has a beta of 1.32, indicating that its stock price is 32% more volatile than the S&P 500. Comparatively, Washington Trust Bancorp has a beta of 0.6, indicating that its stock price is 40% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and price targets for Live Oak Bancshares and Washington Trust Bancorp, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Live Oak Bancshares 0 1 1 0 2.50
Washington Trust Bancorp 0 1 1 0 2.50

Live Oak Bancshares currently has a consensus price target of $22.50, indicating a potential downside of 7.02%. Washington Trust Bancorp has a consensus price target of $40.00, indicating a potential upside of 18.27%. Given Washington Trust Bancorp’s higher probable upside, analysts clearly believe Washington Trust Bancorp is more favorable than Live Oak Bancshares.

Profitability

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

Net Margins Return on Equity Return on Assets
Live Oak Bancshares 2.15% 1.34% 0.13%
Washington Trust Bancorp 25.07% 13.23% 1.22%

Institutional and Insider Ownership

43.0% of Live Oak Bancshares shares are owned by institutional investors. Comparatively, 71.5% of Washington Trust Bancorp shares are owned by institutional investors. 25.1% of Live Oak Bancshares shares are owned by company insiders. Comparatively, 2.3% of Washington Trust Bancorp shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Live Oak Bancshares and Washington Trust Bancorp’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Live Oak Bancshares $295.86 million 3.32 $18.03 million $0.44 55.00
Washington Trust Bancorp $264.74 million 2.20 $69.12 million $3.96 8.54

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

Summary

Washington Trust Bancorp beats Live Oak Bancshares on 9 of the 15 factors compared between the two stocks.

About Live Oak Bancshares

Live Oak Bancshares, Inc. operates as the bank holding company for Live Oak Banking Company that provides various commercial banking products and services to individuals, small businesses, and professionals in North Carolina, the United States. The company accepts various deposit products, including noninterest-bearing demand, interest-bearing checking, money market, savings, and time deposits. It also offers commercial and industrial loans; construction and development loans; owner occupied and non-owner occupied collateral commercial real estate loans; and commercial land loans. In addition, the company provides settlement, accounting, and securitization services for government guaranteed loans; and wealth and investment management services to high-net-worth individuals and families. Live Oak Bancshares, Inc. was founded in 2008 and is headquartered in Wilmington, North Carolina.

About Washington Trust Bancorp

Washington Trust Bancorp, Inc. operates as the bank holding company for The Washington Trust Company, of Westerly that offers various financial products and services to individuals and businesses. The company operates in two segments, Commercial Banking and Wealth Management Services. The Commercial Banking segment provides various commercial and retail lending products, which include commercial real estate loans consisting of commercial mortgages and construction loans; commercial and industrial loans; residential real estate loans; and consumer loans comprising home equity loans and lines of credit, personal installment loans, and loans to individuals secured by general aviation aircraft. This segment also offers deposit accounts, including interest-bearing and noninterest-bearing demand deposits, NOW and savings accounts, money market and retirement deposit accounts, and time deposits, as well as debit card, ATM, telephone and Internet banking, mobile banking, remote deposit capture, and other cash management services. The Wealth Management Services segment provides investment management; financial planning; personal trust and estate services, such as trustee, personal representative, custodian, and guardian; and settlement of decedents' estates, as well as institutional trust services comprising custody and fiduciary services. This segment serves personal and institutional, and mutual funds clients. The company also operates as a licensed broker-dealer that offers variable annuities, college savings plans, and mutual funds. As of December 31, 2018, it had 10 branch offices located in southern Rhode Island; 11 branch offices located in the greater Providence area in Rhode Island; and 1 branch office located in southeastern Connecticut. Washington Trust Bancorp, Inc. was founded in 1800 and is headquartered in Westerly, Rhode Island.

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