Bay Banks of Virginia (OTCMKTS:BAYK) and Guaranty Federal Bancshares (NASDAQ:GFED) are both small-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their institutional ownership, risk, earnings, profitability, analyst recommendations, dividends and valuation.

Dividends

Bay Banks of Virginia pays an annual dividend of $0.04 per share and has a dividend yield of 0.4%. Guaranty Federal Bancshares pays an annual dividend of $0.48 per share and has a dividend yield of 1.9%. Bay Banks of Virginia pays out 25.0% of its earnings in the form of a dividend. Guaranty Federal Bancshares pays out 32.9% 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. Guaranty Federal Bancshares has raised its dividend for 3 consecutive years. Guaranty Federal Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of recent ratings for Bay Banks of Virginia and Guaranty Federal Bancshares, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Bay Banks of Virginia 0 0 0 0 N/A
Guaranty Federal Bancshares 0 0 1 0 3.00

Guaranty Federal Bancshares has a consensus target price of $25.00, suggesting a potential downside of 1.57%. Given Guaranty Federal Bancshares’ higher probable upside, analysts plainly believe Guaranty Federal Bancshares is more favorable than Bay Banks of Virginia.

Profitability

This table compares Bay Banks of Virginia and Guaranty Federal Bancshares’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Bay Banks of Virginia 1.65% 2.37% 0.28%
Guaranty Federal Bancshares 8.51% 9.16% 0.83%

Volatility & Risk

Bay Banks of Virginia has a beta of 0.27, suggesting that its share price is 73% less volatile than the S&P 500. Comparatively, Guaranty Federal Bancshares has a beta of -0.11, suggesting that its share price is 111% less volatile than the S&P 500.

Valuation and Earnings

This table compares Bay Banks of Virginia and Guaranty Federal Bancshares’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Bay Banks of Virginia $37.38 million 3.31 -$1.27 million $0.16 58.44
Guaranty Federal Bancshares $35.17 million 3.21 $5.15 million $1.46 17.40

Guaranty Federal Bancshares has lower revenue, but higher earnings than Bay Banks of Virginia. Guaranty Federal Bancshares is trading at a lower price-to-earnings ratio than Bay Banks of Virginia, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

10.8% of Bay Banks of Virginia shares are held by institutional investors. Comparatively, 27.0% of Guaranty Federal Bancshares shares are held by institutional investors. 7.3% of Bay Banks of Virginia shares are held by insiders. Comparatively, 29.5% of Guaranty Federal Bancshares shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Summary

Guaranty Federal Bancshares beats Bay Banks of Virginia on 11 of the 16 factors compared between the two stocks.

Bay Banks of Virginia Company Profile

Bay Banks of Virginia, Inc., through its subsidiaries, provides various banking products and services to businesses, professionals, and consumers in Virginia. The company accepts checking accounts, savings accounts, money market accounts, cash management accounts, certificates of deposit, and individual retirement accounts. Its loan products include commercial and industrial loans, such as small business loans, asset based loans, and other secured and unsecured loans and lines of credit; residential and commercial mortgages; home equity loans; consumer installment loans; and consumer loans comprising automobile and boat financing, home improvement loans, and unsecured personal loans. It also offers credit cards; investment accounts; and insurance, online banking, telephone banking, mobile banking, analysis checking, cash management deposit, wire, direct deposit payroll, and remote deposit services, as well as a line of commercial lending options. In addition, the company offers management services, including estate planning and settlement, revocable and irrevocable living trusts, testamentary trusts, custodial accounts, investment management accounts, and managed and self-directed rollover individual retirement accounts for personal and corporate trusts. As of July 13, 2018, it operated 19 banking offices; and a loan production office located throughout the Richmond market area, the Northern Neck region, Tri-Cities area of Petersburg, Hopewell and Colonial Heights, Middlesex County, and Hampton Roads region. Bay Banks of Virginia, Inc. was founded in 1930 and is headquartered in Richmond, Virginia.

Guaranty Federal Bancshares Company Profile

Guaranty Federal Bancshares, Inc. operates as the bank holding company for Guaranty Bank that provides banking products and services in the southwestern corner of Missouri. The company's deposit products include checking accounts, money market accounts, savings accounts, fixed-term certificates of deposit, and individual retirement accounts, as well as demand deposits and NOW accounts. Its loan portfolio comprises commercial real estate loans, one-to four-family mortgage loans, multi-family residential mortgage loans, and construction loans; and consumer and other loans, such as loans secured by certificates of deposit, automobile loans, boat loans, and home equity loans, as well as business loans. As of April 18, 2017, the company had nine full-service branches in Greene and Christian Counties; and loan production offices in Jasper and Webster Counties. It also provides access to approximately 24,000 ATMs. Guaranty Federal Bancshares, Inc. was founded in 1913 and is based in Springfield, Missouri.

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