Arrow Financial (NASDAQ:AROW) vs. Shore Bancshares (NASDAQ:SHBI) Critical Survey

Shore Bancshares (NASDAQ:SHBI) and Arrow Financial (NASDAQ:AROW) are both small-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their risk, dividends, institutional ownership, earnings, valuation, profitability and analyst recommendations.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Shore Bancshares and Arrow Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Shore Bancshares	0	1	1	0	2.50
Arrow Financial	0	1	0	0	2.00

Shore Bancshares currently has a consensus target price of $20.00, indicating a potential upside of 16.69%. Arrow Financial has a consensus target price of $31.00, indicating a potential downside of 3.09%. Given Shore Bancshares’ stronger consensus rating and higher probable upside, equities research analysts clearly believe Shore Bancshares is more favorable than Arrow Financial.

Institutional & Insider Ownership

59.8% of Shore Bancshares shares are held by institutional investors. Comparatively, 46.7% of Arrow Financial shares are held by institutional investors. 8.6% of Shore Bancshares shares are held by company insiders. Comparatively, 3.6% of Arrow Financial shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

Shore Bancshares pays an annual dividend of $0.48 per share and has a dividend yield of 2.8%. Arrow Financial pays an annual dividend of $1.12 per share and has a dividend yield of 3.5%. Shore Bancshares pays out 38.4% of its earnings in the form of a dividend. Arrow Financial pays out 57.1% 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 Shore Bancshares and Arrow Financial”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Shore Bancshares	$197.90 million	2.89	$11.23 million	$1.25	13.71
Arrow Financial	$138.99 million	3.85	$30.08 million	$1.96	16.32

Arrow Financial has lower revenue, but higher earnings than Shore Bancshares. Shore Bancshares is trading at a lower price-to-earnings ratio than Arrow Financial, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Shore Bancshares and Arrow Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Shore Bancshares	12.85%	10.11%	0.89%
Arrow Financial	15.00%	8.59%	0.77%

Risk & Volatility

Shore Bancshares has a beta of 0.97, meaning that its share price is 3% less volatile than the S&P 500. Comparatively, Arrow Financial has a beta of 0.75, meaning that its share price is 25% less volatile than the S&P 500.

Summary

Shore Bancshares beats Arrow Financial on 10 of the 16 factors compared between the two stocks.

About Shore Bancshares

Shore Bancshares, Inc. operates as a bank holding company for the Shore United Bank, N.A. that provides various commercial and consumer banking products and services to individuals, businesses, and other organizations. It offers checking, savings, overnight investment sweep, and money market accounts; and regular and IRA certificates of deposit, as well as CDARS programs and cash management services. The company also provides commercial loans, such as secured and unsecured loans, working capital loans, lines of credit, term loans, accounts receivable financing, real estate acquisition and development loans, construction loans, and letters of credit; residential real estate construction loans; residential mortgage loans; and loans to consumers, including home equity, automobile, installment, home improvement, and personal lines of credit, as well as other consumer financing products. In addition, it offers trust, asset management, and financial planning services; treasury management services, such as merchant card processing, remote deposit capture, and ACH origination, as well as telephone, mobile, and Internet banking services; safe deposit boxes; debit and credit cards; and automatic teller machine services. Shore Bancshares, Inc. was founded in 1876 and is headquartered in Easton, Maryland.

About Arrow Financial

Arrow Financial Corporation, a bank holding company, provides commercial and consumer banking, and financial products and services. The company’s deposit products include demand deposits, interest-bearing checking accounts, savings deposits, time deposits, and other time deposits. Its lending activities comprise commercial loans, such as term loans, time notes, and lines of credit; and commercial real estate loans to finance real estate purchases, refinancing, expansions, and enhancement to commercial properties, as well as commercial construction and land development loans to finance projects. The company’s lending activities also include consumer installment loans to finance personal expenditures, personal lines of credit, overdraft protection, and automobile loans; and residential real estate loans, fixed home equity loans, and home equity lines of credit for consumers to finance home improvements, debt consolidation, education, and other uses. In addition, it maintains an indirect lending program. Further, the company provides retirement planning, trust, and estate administration services for individuals, as well as pension, profit-sharing, and employee benefit plan administration services for corporations. Additionally, it offers insurance agency services comprising group health care policies and life insurance, and property and casualty insurance products; and investment advisory services to its proprietary mutual funds, as well as holds a real estate investment trust. It operates in the northeastern region of New York State in Warren, Washington, Saratoga, Essex, Clinton, Rensselaer, Albany, and Schenectady counties. Arrow Financial Corporation was founded in 1851 and is headquartered in Glens Falls, New York.