Clifton Bancorp Inc. (NASDAQ:CSBK) shares are up more than 1.96% this year and recently decreased -0.64% or -$0.11 to settle at $16.99. United Community Financial Corp. (NASDAQ:UCFC), on the other hand, is up 6.60% year to date as of 11/21/2017. It currently trades at $9.53 and has returned 3.81% during the past week.
Clifton Bancorp Inc. (NASDAQ:CSBK) and United Community Financial Corp. (NASDAQ:UCFC) are the two most active stocks in the Savings & Loans industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.
Profitability and Returns
Growth isn’t very attractive to investors if companies are sacrificing profitability and shareholder returns to achieve that growth. We will use EBITDA margin and Return on Investment (ROI), which control for differences in capital structure between the two companies, to measure profitability and return., compared to an EBITDA margin of 47.02% for United Community Financial Corp. (UCFC). CSBK’s ROI is 8.30% while UCFC has a ROI of 19.50%. The interpretation is that UCFC’s business generates a higher return on investment than CSBK’s.
Cash is king when it comes to investing. CSBK’s free cash flow (“FCF”) per share for the trailing twelve months was -0.24. Comparatively, UCFC’s free cash flow per share was +0.22. On a percent-of-sales basis, CSBK’s free cash flow was -0.01% while UCFC converted 0.01% of its revenues into cash flow. This means that, for a given level of sales, UCFC is able to generate more free cash flow for investors.
CSBK’s debt-to-equity ratio is 0.00 versus a D/E of 0.00 for UCFC. CSBK is therefore the more solvent of the two companies, and has lower financial risk.
CSBK trades at a forward P/E of 34.67, a P/B of 1.26, and a P/S of 8.41, compared to a forward P/E of 14.37, a P/B of 1.66, and a P/S of 5.46 for UCFC. CSBK is the cheaper of the two stocks on book value basis but is expensive in terms of P/E and P/S ratio. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Analyst Price Targets and Opinions
Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. CSBK is currently priced at a -12.87% to its one-year price target of 19.50. Comparatively, UCFC is -9.24% relative to its price target of 10.50. This suggests that CSBK is the better investment over the next year.
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 1.50 for CSBK and 2.00 for UCFC, which implies that analysts are more bullish on the outlook for UCFC.
Risk and Volatility
Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. CSBK has a beta of 0.39 and UCFC’s beta is 0.52. CSBK’s shares are therefore the less volatile of the two stocks.
Insider Activity and Investor Sentiment
Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment.CSBK has a short ratio of 18.30 compared to a short interest of 3.05 for UCFC. This implies that the market is currently less bearish on the outlook for UCFC.
United Community Financial Corp. (NASDAQ:UCFC) beats Clifton Bancorp Inc. (NASDAQ:CSBK) on a total of 7 of the 14 factors compared between the two stocks. UCFC is more profitable, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. In terms of valuation, UCFC is the cheaper of the two stocks on an earnings and sales basis, Finally, UCFC has better sentiment signals based on short interest.