Critical Comparison: Magyar Bancorp (NASDAQ:MGYR) versus Franklin Financial Services (NASDAQ:FRAF)

Franklin Financial Services (NASDAQ:FRAF) and Magyar Bancorp (NASDAQ:MGYR) are both small-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their dividends, valuation, earnings, institutional ownership, analyst recommendations, risk and profitability.

Profitability

This table compares Franklin Financial Services and Magyar Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Franklin Financial Services	18.20%	14.21%	1.08%
Magyar Bancorp	18.89%	9.69%	1.14%

Volatility & Risk

Franklin Financial Services has a beta of -0.02, meaning that its share price is 102% less volatile than the S&P 500. Comparatively, Magyar Bancorp has a beta of 0.22, meaning that its share price is 78% less volatile than the S&P 500.

Dividends

Franklin Financial Services pays an annual dividend of $1.36 per share and has a dividend yield of 2.1%. Magyar Bancorp pays an annual dividend of $0.40 per share and has a dividend yield of 2.1%. Franklin Financial Services pays out 24.8% of its earnings in the form of a dividend. Magyar Bancorp pays out 21.4% 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. Franklin Financial Services has raised its dividend for 1 consecutive years and Magyar Bancorp has raised its dividend for 3 consecutive years.

Analyst Recommendations

This is a summary of recent recommendations for Franklin Financial Services and Magyar Bancorp, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Franklin Financial Services	0	1	1	0	2.50
Magyar Bancorp	0	1	0	0	2.00

Franklin Financial Services currently has a consensus price target of $64.00, indicating a potential downside of 0.09%. Given Franklin Financial Services’ stronger consensus rating and higher possible upside, research analysts plainly believe Franklin Financial Services is more favorable than Magyar Bancorp.

Institutional & Insider Ownership

24.8% of Franklin Financial Services shares are held by institutional investors. Comparatively, 46.3% of Magyar Bancorp shares are held by institutional investors. 5.9% of Franklin Financial Services shares are held by insiders. Comparatively, 11.1% of Magyar Bancorp shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares Franklin Financial Services and Magyar Bancorp”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Franklin Financial Services	$133.55 million	2.15	$21.23 million	$5.49	11.67
Magyar Bancorp	$39.21 million	3.13	$9.76 million	$1.87	10.17

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

Summary

Franklin Financial Services beats Magyar Bancorp on 9 of the 17 factors compared between the two stocks.

About Franklin Financial Services

Franklin Financial Services Corporation operates as the bank holding company for Farmers and Merchants Trust Company of Chambersburg that provides commercial, retail banking, and trust services to businesses, individuals, governmental entities, and non-profit organizations in Pennsylvania. It offers various deposit products, including checking, savings, money management, and time deposit accounts, as well as demand deposits. The company also provides commercial real estate, construction and land development, commercial and industrial, and residential mortgage loans, as well as installment and revolving loans; consumer loans comprising unsecured personal lines of credit and installment loans; and secured and unsecured commercial and industrial loans, including accounts receivable and inventory financing, and commercial equipment financing. In addition, it offers various investment and trust services comprising estate planning and administration, corporate and personal trust fund management, pension, and profit sharing and other employee benefit funds management services, and custodial services, as well as non-trust related investment services; sells mutual funds, annuities, and insurance products; and offers safe deposit, pension, and fiduciary services. Further, the company engages in non-bank investment activities, such as venture capital investments. The company was founded in 1906 and is headquartered in Chambersburg, Pennsylvania.

About Magyar Bancorp

Magyar Bancorp, Inc. operates as the holding company for Magyar Bank that provides various consumer and commercial banking services to individuals, businesses, and nonprofit organizations in New Jersey, the United States. It accepts various deposit accounts, including demand, savings, NOW, money market, and retirement accounts, as well as certificates of deposit. The company also provides residential mortgage loans, multi-family and commercial real estate mortgage loans, home equity loans and lines of credit, commercial business loans, and construction loans, as well as small business administration loans. In addition, it offers non-deposit investment products and financial planning services, including insurance products, fixed and variable annuities, and retirement planning for individual and commercial customers; and buys, sells, and holds investment securities. The company has branch offices located in New Brunswick, North Brunswick, South Brunswick, Branchburg, Bridgewater, and Edison, New Jersey. Magyar Bancorp, Inc. was founded in 1922 and is headquartered in New Brunswick, New Jersey.