Head to Head Survey: Orrstown Financial Services (NASDAQ:ORRF) versus Magyar Bancorp (NASDAQ:MGYR)

Magyar Bancorp (NASDAQ:MGYR) and Orrstown Financial Services (NASDAQ:ORRF) 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, earnings, analyst recommendations, risk, valuation, dividends and institutional ownership.

Analyst Recommendations

This is a breakdown of recent recommendations for Magyar Bancorp and Orrstown Financial Services, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Magyar Bancorp	0	1	0	0	2.00
Orrstown Financial Services	0	1	3	0	2.75

Orrstown Financial Services has a consensus target price of $42.00, indicating a potential upside of 13.69%. Given Orrstown Financial Services’ stronger consensus rating and higher probable upside, analysts clearly believe Orrstown Financial Services is more favorable than Magyar Bancorp.

Dividends

Magyar Bancorp pays an annual dividend of $0.40 per share and has a dividend yield of 2.3%. Orrstown Financial Services pays an annual dividend of $1.20 per share and has a dividend yield of 3.2%. Magyar Bancorp pays out 22.5% of its earnings in the form of a dividend. Orrstown Financial Services pays out 27.5% 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. Magyar Bancorp has raised its dividend for 3 consecutive years and Orrstown Financial Services has raised its dividend for 10 consecutive years. Orrstown Financial Services is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Magyar Bancorp and Orrstown Financial Services’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Magyar Bancorp	18.32%	9.38%	1.10%
Orrstown Financial Services	23.58%	14.96%	1.56%

Volatility & Risk

Magyar Bancorp has a beta of 0.23, suggesting that its share price is 77% less volatile than the S&P 500. Comparatively, Orrstown Financial Services has a beta of 0.77, suggesting that its share price is 23% less volatile than the S&P 500.

Institutional and Insider Ownership

46.3% of Magyar Bancorp shares are held by institutional investors. Comparatively, 44.3% of Orrstown Financial Services shares are held by institutional investors. 11.1% of Magyar Bancorp shares are held by company insiders. Comparatively, 4.3% of Orrstown Financial Services shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Magyar Bancorp and Orrstown Financial Services”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Magyar Bancorp	$58.42 million	1.94	$9.76 million	$1.78	9.82
Orrstown Financial Services	$356.05 million	2.04	$80.86 million	$4.37	8.45

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

Summary

Orrstown Financial Services beats Magyar Bancorp on 13 of the 17 factors compared between the two stocks.

About Magyar Bancorp

Magyar Bancorp, Inc. operates as the holding company for Magyar Bank that provides various consumer and commercial banking services to individuals, businesses, and nonprofit organizations in New Jersey, the United States. It accepts various deposit accounts, including demand, savings, NOW, money market, and retirement accounts, as well as certificates of deposit. The company also provides residential mortgage loans, multi-family and commercial real estate mortgage loans, home equity loans and lines of credit, commercial business loans, and construction loans, as well as small business administration loans. In addition, it offers non-deposit investment products and financial planning services, including insurance products, fixed and variable annuities, and retirement planning for individual and commercial customers; and buys, sells, and holds investment securities. The company has branch offices located in New Brunswick, North Brunswick, South Brunswick, Branchburg, Bridgewater, and Edison, New Jersey. Magyar Bancorp, Inc. was founded in 1922 and is headquartered in New Brunswick, New Jersey.

About Orrstown Financial Services

Orrstown Financial Services, Inc. operates as the financial holding company for Orrstown Bank that provides commercial banking and financial advisory services to retail, commercial, non-profit, and government clients in the United States. It accepts various deposits, including checking, savings, time, demand, and money market deposits, as well as certificates of deposit. The company also offers commercial loans, such as commercial real estate, equipment, construction, working capital, and other commercial purpose loans, as well as industrial loans; consumer loans, such as home equity and other consumer loans, as well as home equity lines of credit; residential mortgage loans; acquisition and development loans; municipal loans; and installment and other loans. In addition, it provides renders services as trustee, executor, administrator, guardian, managing agent, custodian, and investment advisor, as well as other fiduciary services under the Orrstown Financial Advisors name; and retail brokerage services through a third-party broker/dealer arrangement. Further, the company offers fiduciary, investment advisory, insurance, and brokerage services. Orrstown Financial Services, Inc. was founded in 1919 and is headquartered in Shippensburg, Pennsylvania.