Critical Review: United Bancorp (NASDAQ:UBCP) and Arrow Financial (NASDAQ:AROW)

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

Earnings and Valuation

This table compares Arrow Financial and United Bancorp”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Arrow Financial	$242.58 million	2.80	$43.95 million	$3.10	11.84
United Bancorp	$47.51 million	1.73	$7.75 million	$1.38	10.37

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

Dividends

Arrow Financial pays an annual dividend of $1.20 per share and has a dividend yield of 3.3%. United Bancorp pays an annual dividend of $0.79 per share and has a dividend yield of 5.5%. Arrow Financial pays out 38.7% of its earnings in the form of a dividend. United Bancorp pays out 57.2% 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. Arrow Financial has increased its dividend for 7 consecutive years and United Bancorp has increased its dividend for 13 consecutive years. United Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Arrow Financial	20.56%	12.13%	1.17%
United Bancorp	16.55%	11.53%	0.92%

Volatility & Risk

Arrow Financial has a beta of 0.76, indicating that its stock price is 24% less volatile than the S&P 500. Comparatively, United Bancorp has a beta of 0.31, indicating that its stock price is 69% less volatile than the S&P 500.

Insider & Institutional Ownership

46.7% of Arrow Financial shares are owned by institutional investors. Comparatively, 15.4% of United Bancorp shares are owned by institutional investors. 3.5% of Arrow Financial shares are owned by company insiders. Comparatively, 13.9% of United Bancorp shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of recent recommendations and price targets for Arrow Financial and United Bancorp, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Arrow Financial	0	3	3	0	2.50
United Bancorp	0	1	0	0	2.00

Arrow Financial presently has a consensus target price of $41.62, suggesting a potential upside of 13.45%. Given Arrow Financial’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Arrow Financial is more favorable than United Bancorp.

Summary

Arrow Financial beats United Bancorp on 14 of the 17 factors compared between the two stocks.

About Arrow Financial

Arrow Financial Corporation, a bank holding company, provides commercial and consumer banking, and financial products and services. The company’s deposit products include demand deposits, interest-bearing checking accounts, savings deposits, time deposits, and other time deposits. Its lending activities comprise commercial loans, such as term loans, time notes, and lines of credit; and commercial real estate loans to finance real estate purchases, refinancing, expansions, and enhancement to commercial properties, as well as commercial construction and land development loans to finance projects. The company’s lending activities also include consumer installment loans to finance personal expenditures, personal lines of credit, overdraft protection, and automobile loans; and residential real estate loans, fixed home equity loans, and home equity lines of credit for consumers to finance home improvements, debt consolidation, education, and other uses. In addition, it maintains an indirect lending program. Further, the company provides retirement planning, trust, and estate administration services for individuals, as well as pension, profit-sharing, and employee benefit plan administration services for corporations. Additionally, it offers insurance agency services comprising group health care policies and life insurance, and property and casualty insurance products; and investment advisory services to its proprietary mutual funds, as well as holds a real estate investment trust. It operates in the northeastern region of New York State in Warren, Washington, Saratoga, Essex, Clinton, Rensselaer, Albany, and Schenectady counties. Arrow Financial Corporation was founded in 1851 and is headquartered in Glens Falls, New York.

About United Bancorp

United Bancorp, Inc. operates as the bank holding company for Unified Bank that provides commercial and retail banking services in Ohio. The company provides range of banking and financial services, which includes accepting demand, savings, and time deposits. It also offers commercial, real estate and consumer loans. United Bancorp, Inc. was founded in 1902 and is headquartered in Martins Ferry, Ohio.