Analyzing Northeast Bancorp (NASDAQ:NBN) and Lake Shore Bancorp (NASDAQ:LSBK)

Northeast Bancorp (NASDAQ:NBN) and Lake Shore Bancorp (NASDAQ:LSBK) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their earnings, dividends, valuation, profitability, risk, analyst recommendations and institutional ownership.

Profitability

This table compares Northeast Bancorp and Lake Shore Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Northeast Bancorp	25.96%	18.63%	2.13%
Lake Shore Bancorp	20.23%	6.30%	1.11%

Insider & Institutional Ownership

8.8% of Lake Shore Bancorp shares are held by institutional investors. 14.2% of Northeast Bancorp shares are held by insiders. Comparatively, 8.4% of Lake Shore Bancorp shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Northeast Bancorp pays an annual dividend of $0.04 per share and has a dividend yield of 0.0%. Lake Shore Bancorp pays an annual dividend of $0.36 per share and has a dividend yield of 2.3%. Northeast Bancorp pays out 0.3% of its earnings in the form of a dividend. Lake Shore Bancorp pays out 30.5% 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.

Valuation and Earnings

This table compares Northeast Bancorp and Lake Shore Bancorp”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Northeast Bancorp	$221.84 million	4.68	$83.44 million	$11.67	10.85
Lake Shore Bancorp	$39.56 million	3.10	$7.27 million	$1.18	13.22

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

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Northeast Bancorp and Lake Shore Bancorp, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Northeast Bancorp	0	1	2	0	2.67
Lake Shore Bancorp	0	1	0	0	2.00

Northeast Bancorp currently has a consensus price target of $130.50, suggesting a potential upside of 3.05%. Given Northeast Bancorp’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Northeast Bancorp is more favorable than Lake Shore Bancorp.

Volatility and Risk

Northeast Bancorp has a beta of 0.59, indicating that its stock price is 41% less volatile than the S&P 500. Comparatively, Lake Shore Bancorp has a beta of 0.32, indicating that its stock price is 68% less volatile than the S&P 500.

Summary

Northeast Bancorp beats Lake Shore Bancorp on 13 of the 16 factors compared between the two stocks.

About Northeast Bancorp

Northeast Bank provides banking services to individual and corporate customers in Maine. The company's deposit products include demand deposit, NOW, money market, savings, certificate of deposit, and individual retirement accounts, as well as checking accounts. Its loan portfolio comprises residential mortgage loans; multi-family and other commercial real estate loans; commercial and industrial loans, such as term loans, lines of credit and equipment, and receivables financing; consumer loans comprising mobile home and overdraft, and deposit-secured loans; and small business administration loans. In addition, the company offers telephone banking, online banking and bill payment, mobile banking, cash management, and remote deposit capture services, as well as debit and credit card, ATM, electronic transfer, and check services. Further, it provides various services, such as money market, merchant, and payroll and HR. Northeast Bank was founded in 1872 and is headquartered in Portland, Maine.

About Lake Shore Bancorp

Lake Shore Bancorp, Inc. operates as a savings and loan holding company for Lake Shore Servings Bank. It offers personal services such as checking, savings, lending, banking, debit card, e-services, and online banking; and business services including deposit products, commercial loans, and business e-statements. The company was founded in 2006 and is headquartered in Dunkirk, NY.