Live Oak Bancshares (NASDAQ: LOB) and Old Second Bancorp (NASDAQ:OSBC) are both small-cap financials companies, but which is the superior stock? We will compare the two companies based on the strength of their valuation, analyst recommendations, earnings, risk, dividends, profitability and institutional ownership.

Profitability

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

Net Margins Return on Equity Return on Assets
Live Oak Bancshares 17.68% 13.60% 1.72%
Old Second Bancorp 29.78% 16.53% 1.38%

Insider and Institutional Ownership

40.9% of Live Oak Bancshares shares are owned by institutional investors. Comparatively, 68.3% of Old Second Bancorp shares are owned by institutional investors. 30.1% of Live Oak Bancshares shares are owned by insiders. Comparatively, 3.2% of Old Second Bancorp shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

Live Oak Bancshares pays an annual dividend of $0.12 per share and has a dividend yield of 0.5%. Old Second Bancorp pays an annual dividend of $0.04 per share and has a dividend yield of 0.3%. Live Oak Bancshares pays out 12.9% of its earnings in the form of a dividend. Old Second Bancorp pays out 5.3% 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.

Earnings and Valuation

This table compares Live Oak Bancshares and Old Second 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 $150.81 million 6.43 $13.77 million $0.93 26.13
Old Second Bancorp $101.95 million 4.23 $15.68 million $0.75 19.40

Old Second Bancorp has lower revenue, but higher earnings than Live Oak Bancshares. Old Second 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.

Analyst Recommendations

This is a summary of current recommendations and price targets for Live Oak Bancshares and Old Second Bancorp, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Live Oak Bancshares 0 1 2 0 2.67
Old Second Bancorp 0 1 2 0 2.67

Live Oak Bancshares presently has a consensus price target of $25.67, indicating a potential upside of 5.62%. Old Second Bancorp has a consensus price target of $12.25, indicating a potential downside of 15.81%. Given Live Oak Bancshares’ higher probable upside, analysts plainly believe Live Oak Bancshares is more favorable than Old Second Bancorp.

Summary

Live Oak Bancshares beats Old Second Bancorp on 8 of the 13 factors compared between the two stocks.

About Live Oak Bancshares

Live Oak Bancshares, Inc. is a bank holding company. The Company conducts business operations primarily through its commercial bank subsidiary, Live Oak Banking Company (the Bank). The Bank specializes in providing lending services to small businesses nationwide in targeted industries. The loans originated by the Bank are guaranteed by the small business administration (SBA). The Company’s loan portfolio includes commercial and industrial loans; construction and development loans; commercial real estate, and commercial land. The Company’s investment securities include the United States Government agencies, residential mortgage-backed securities and mutual fund. The Company’s deposits include non-interest-bearing deposits and interest-bearing deposits, such as interest-bearing checking, money market and time deposits.

About Old Second Bancorp

Old Second Bancorp, Inc. is a bank holding company. The Company conducts a full service community banking and trust business through its subsidiaries, including Old Second National Bank (the Bank), Old Second Capital Trust I, Old Second Capital Trust II and Old Second Affordable Housing Fund, L.L.C. The Bank’s full service banking businesses include the customary consumer and commercial products and services that banking institutions provide, including demand, negotiable order of withdrawal, money market and individual retirement accounts; commercial, industrial, consumer and real estate lending, including installment loans, agricultural loans, lines of credit and overdraft checking; safe deposit operations, and a range of additional services tailored to the needs of individual customers, such as the acquisition of the United States Treasury notes and bonds, money orders, cashiers’ checks and foreign currency, direct deposit, debit cards, credit cards and other special services.

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