Critical Analysis: Eagle Bancorp (NASDAQ:EGBN) and Enterprise Bancorp (NASDAQ:EBTC)

Eagle Bancorp (NASDAQ:EGBN) and Enterprise Bancorp (NASDAQ:EBTC) are both small-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their earnings, analyst recommendations, institutional ownership, profitability, valuation, dividends and risk.

Dividends

Eagle Bancorp pays an annual dividend of $0.66 per share and has a dividend yield of 3.5%. Enterprise Bancorp pays an annual dividend of $1.00 per share and has a dividend yield of 2.7%. Eagle Bancorp pays out -42.0% of its earnings in the form of a dividend. Enterprise Bancorp pays out 30.6% 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. Eagle Bancorp is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

78.0% of Eagle Bancorp shares are owned by institutional investors. Comparatively, 38.9% of Enterprise Bancorp shares are owned by institutional investors. 3.1% of Eagle Bancorp shares are owned by insiders. Comparatively, 21.7% of Enterprise Bancorp shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares Eagle Bancorp and Enterprise Bancorp”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Eagle Bancorp	$308.63 million	1.85	-$47.03 million	($1.57)	-11.96
Enterprise Bancorp	$170.74 million	2.67	$38.73 million	$3.27	11.20

Enterprise Bancorp has lower revenue, but higher earnings than Eagle Bancorp. Eagle Bancorp is trading at a lower price-to-earnings ratio than Enterprise Bancorp, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Eagle Bancorp and Enterprise Bancorp, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Eagle Bancorp	0	2	0	0	2.00
Enterprise Bancorp	0	0	0	0	0.00

Eagle Bancorp currently has a consensus target price of $28.75, indicating a potential upside of 53.09%. Given Eagle Bancorp’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Eagle Bancorp is more favorable than Enterprise Bancorp.

Profitability

This table compares Eagle Bancorp and Enterprise Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Eagle Bancorp	-6.65%	4.68%	0.50%
Enterprise Bancorp	15.30%	11.15%	0.82%

Volatility & Risk

Eagle Bancorp has a beta of 1.04, meaning that its stock price is 4% more volatile than the S&P 500. Comparatively, Enterprise Bancorp has a beta of 0.56, meaning that its stock price is 44% less volatile than the S&P 500.

Summary

Enterprise Bancorp beats Eagle Bancorp on 8 of the 15 factors compared between the two stocks.

About Eagle Bancorp

Eagle Bancorp, Inc. operates as the bank holding company for EagleBank that provides commercial and consumer banking services primarily in the United States. The company also offers various commercial and consumer lending products comprising commercial loans for working capital, equipment purchases, real estate lines of credit, and government contract financing; asset based lending and accounts receivable financing; construction and commercial real estate loans; business equipment financing; consumer home equity lines of credit, personal lines of credit, and term loans; consumer installment loans, such as auto and personal loans; personal credit cards; and residential mortgage loans. In addition, it provides online and mobile banking services; checking and saving accounts; and other deposit services, including cash management services, business sweep accounts, lock boxes, remote deposit captures, account reconciliation services, merchant card services, safety deposit boxes, and automated clearing house origination, as well as after-hours depositories and ATM services. Further, the company offers insurance products and services through a referral program; and treasury management services. The company serves sole proprietors, small and medium-sized businesses, partnerships, corporations, and non-profit organizations and associations, as well as investors. Eagle Bancorp, Inc. was incorporated in 1997 and is headquartered in Bethesda, Maryland.

About Enterprise Bancorp

Enterprise Bancorp, Inc. operates as the holding company for Enterprise Bank and Trust Company that engages in the provision of commercial banking products and services. It offers commercial and retail deposit products, including checking accounts, limited-transactional savings and money market accounts, commercial sweep products, and term certificates of deposit. The company also provides commercial real estate, commercial and industrial, commercial construction, residential, and consumer loans, as well as home equity loans and lines of credit. In addition, the company offers cash management services; wealth advisory and management services that include customized investment management and trust services to individuals, family groups, commercial businesses, trusts, foundations, non-profit organizations, and endowments; brokerage and management services to individual investors; insurance services; and online and mobile banking services. The company was founded in 1989 and is headquartered in Lowell, Massachusetts.