Reviewing CapStar Financial (NASDAQ:CSTR) and Surrey Bancorp (OTCMKTS:SRYB)

CapStar Financial (NASDAQ:CSTR) and Surrey Bancorp (OTCMKTS:SRYB) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their dividends, risk, institutional ownership, earnings, analyst recommendations, profitability and valuation.

Analyst Ratings

This is a summary of recent recommendations and price targets for CapStar Financial and Surrey Bancorp, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
CapStar Financial	0	1	0	0	2.00
Surrey Bancorp	0	0	0	0	N/A

CapStar Financial presently has a consensus price target of $15.58, indicating a potential downside of 22.47%. Given CapStar Financial’s higher possible upside, equities analysts clearly believe CapStar Financial is more favorable than Surrey Bancorp.

Valuation & Earnings

This table compares CapStar Financial and Surrey Bancorp’s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
CapStar Financial	$184.34 million	2.27	$29.80 million	$1.57	12.80
Surrey Bancorp	$16.20 million	4.23	$5.10 million	$1.52	10.99

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

Institutional and Insider Ownership

52.2% of CapStar Financial shares are held by institutional investors. Comparatively, 3.7% of Surrey Bancorp shares are held by institutional investors. 9.2% of CapStar Financial shares are held by company insiders. Comparatively, 33.7% of Surrey Bancorp shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Dividends

CapStar Financial pays an annual dividend of $0.44 per share and has a dividend yield of 2.2%. Surrey Bancorp pays an annual dividend of $0.48 per share and has a dividend yield of 2.9%. CapStar Financial pays out 28.0% of its earnings in the form of a dividend. Surrey Bancorp pays out 31.6% 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. CapStar Financial has raised its dividend for 3 consecutive years.

Volatility & Risk

CapStar Financial has a beta of 0.79, suggesting that its stock price is 21% less volatile than the S&P 500. Comparatively, Surrey Bancorp has a beta of 0.65, suggesting that its stock price is 35% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
CapStar Financial	16.17%	8.46%	0.93%
Surrey Bancorp	37.97%	N/A	N/A

Summary

CapStar Financial beats Surrey Bancorp on 11 of the 15 factors compared between the two stocks.

About CapStar Financial

CapStar Financial Holdings, Inc. operates as the bank holding company for CapStar Bank that provides banking and other financial services to individuals and corporate customers in Tennessee, the United States. It offers noninterest-bearing demand deposits, interest-bearing transaction accounts, money market accounts, savings accounts, and time deposits; mortgage banking products; and wealth management and treasury management services. The company also provides commercial and residential real estate, construction and land development, commercial and industrial, consumer, non-owner-occupied real estate, home equity, paycheck protection program (PPP), and other loans, as well as business term loans, equipment financing, and lines of credit to small and medium sized businesses. In addition, it offers mobile banking services; and debit and credit cards. CapStar Financial Holdings, Inc. was founded in 2007 and is headquartered in Nashville, Tennessee.

About Surrey Bancorp

Surrey BanCorp engages in the provision of banking solutions through its subsidiaries, Surrey Bank & Trust . It offers checking accounts, savings, deposit services, mortgages, real estate loans, commercial credit products, business checking, and electronic banking. The company was founded on May 1, 2003 and is headquartered in Mount Airy, NC.