Critical Review: Unity Bancorp (NASDAQ:UNTY) versus Chemung Financial (NASDAQ:CHMG)

Unity Bancorp (NASDAQ:UNTY) and Chemung Financial (NASDAQ:CHMG) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, dividends, risk, analyst recommendations, institutional ownership, valuation and earnings.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Unity Bancorp and Chemung Financial, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Unity Bancorp	0	0	5	1	3.17
Chemung Financial	0	2	3	0	2.60

Unity Bancorp currently has a consensus price target of $65.50, suggesting a potential upside of 18.55%. Chemung Financial has a consensus price target of $87.67, suggesting a potential upside of 8.14%. Given Unity Bancorp’s stronger consensus rating and higher probable upside, analysts clearly believe Unity Bancorp is more favorable than Chemung Financial.

Dividends

Unity Bancorp pays an annual dividend of $0.68 per share and has a dividend yield of 1.2%. Chemung Financial pays an annual dividend of $1.44 per share and has a dividend yield of 1.8%. Unity Bancorp pays out 11.8% of its earnings in the form of a dividend. Chemung Financial pays out 20.7% 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. Unity Bancorp has raised its dividend for 12 consecutive years and Chemung Financial has raised its dividend for 1 consecutive years.

Risk and Volatility

Unity Bancorp has a beta of 0.65, suggesting that its stock price is 35% less volatile than the S&P 500. Comparatively, Chemung Financial has a beta of 0.58, suggesting that its stock price is 42% less volatile than the S&P 500.

Valuation & Earnings

This table compares Unity Bancorp and Chemung Financial”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Unity Bancorp	$188.41 million	2.94	$57.95 million	$5.75	9.61
Chemung Financial	$119.00 million	3.28	$15.10 million	$6.96	11.65

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Unity Bancorp	30.26%	16.10%	1.88%
Chemung Financial	20.68%	12.98%	1.22%

Institutional and Insider Ownership

42.3% of Unity Bancorp shares are held by institutional investors. Comparatively, 47.5% of Chemung Financial shares are held by institutional investors. 28.9% of Unity Bancorp shares are held by company insiders. Comparatively, 12.7% of Chemung Financial shares are held 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.

Summary

Unity Bancorp beats Chemung Financial on 13 of the 18 factors compared between the two stocks.

About Unity Bancorp

Unity Bancorp, Inc. operates as a bank holding company for Unity Bank that provides range of commercial and retail banking services to individuals, small and medium sized businesses, and professional communities. It offers personal and business checking accounts, time deposits, money market accounts, savings accounts, and retirement accounts, as well as noninterest and interest-bearing demand deposits. The company also provides small business administration loans; commercial loans; and residential mortgage and consumer loans, including residential real estate, home equity lines and loans, and residential construction lines, as well as personal loans. In addition, it offers credit and debit cards, wire transfer, safe deposit box, automated teller, and internet and mobile banking services; and automated clearing house origination and remote deposit capture services. Unity Bancorp, Inc. was incorporated in 1991 and is headquartered in Clinton, New Jersey.

About Chemung Financial

Chemung Financial Corporation operates as a bank holding company for Chemung Canal Trust Company that provides a range of banking, financing, fiduciary, and other financial services. The company provides demand, savings, and time deposits; non-interest and interest-bearing checking accounts; and insured money market accounts. It also offers commercial and agricultural loans comprising loans to small to mid-sized businesses; commercial and residential mortgage loans; and consumer loans, including home equity lines of credit and home equity term loans. In addition, the company provides interest rate swaps, letters of credit, employee benefit plans, insurance products, mutual fund, brokerage, and tax preparation services. Further, it offers guardian, custodian, trustee, investment, pension, estate planning, and employee benefit administrative services, as well as acts as an agent for pension, profit-sharing, and other employee benefit trusts. Chemung Financial Corporation was founded in 1833 and is headquartered in Elmira, New York.