Unity Bancorp (NASDAQ:UNTY) & Northern Trust (NASDAQ:NTRS) Critical Review

Northern Trust (NASDAQ:NTRS) and Unity Bancorp (NASDAQ:UNTY) are both finance companies, but which is the better stock? We will compare the two companies based on the strength of their analyst recommendations, dividends, earnings, valuation, profitability, risk and institutional ownership.

Risk and Volatility

Northern Trust has a beta of 1.07, suggesting that its share price is 7% more volatile than the S&P 500. Comparatively, Unity Bancorp has a beta of 0.95, suggesting that its share price is 5% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings for Northern Trust and Unity Bancorp, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Northern Trust	1	9	3	0	2.15
Unity Bancorp	0	0	2	0	3.00

Northern Trust presently has a consensus target price of $113.46, indicating a potential upside of 15.96%. Unity Bancorp has a consensus target price of $54.50, indicating a potential upside of 32.49%. Given Unity Bancorp’s stronger consensus rating and higher probable upside, analysts clearly believe Unity Bancorp is more favorable than Northern Trust.

Dividends

Northern Trust pays an annual dividend of $3.00 per share and has a dividend yield of 3.1%. Unity Bancorp pays an annual dividend of $0.56 per share and has a dividend yield of 1.4%. Northern Trust pays out 30.7% of its earnings in the form of a dividend. Unity Bancorp pays out 13.8% 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. Unity Bancorp has raised its dividend for 12 consecutive years.

Valuation & Earnings

This table compares Northern Trust and Unity Bancorp”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Northern Trust	$8.29 billion	2.31	$2.03 billion	$9.78	10.00
Unity Bancorp	$105.94 million	3.91	$41.45 million	$4.06	10.13

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

Insider & Institutional Ownership

83.2% of Northern Trust shares are owned by institutional investors. Comparatively, 42.3% of Unity Bancorp shares are owned by institutional investors. 0.8% of Northern Trust shares are owned by company insiders. Comparatively, 29.7% of Unity Bancorp shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Northern Trust and Unity Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Northern Trust	12.77%	13.74%	1.03%
Unity Bancorp	25.24%	15.08%	1.59%

Summary

Unity Bancorp beats Northern Trust on 10 of the 17 factors compared between the two stocks.

About Northern Trust

Northern Trust Corporation, a financial holding company, provides wealth management, asset servicing, asset management, and banking solutions for corporations, institutions, families, and individuals worldwide. It operates in two segments, Asset Servicing and Wealth Management. The Asset Servicing segment offers asset servicing and related services, including custody, fund administration, investment operations outsourcing, investment management, investment risk and analytical services, employee benefit services, securities lending, foreign exchange, treasury management, brokerage services, transition management services, banking, and cash management services. This segment serves corporate and public retirement funds, foundations, endowments, fund managers, insurance companies, sovereign wealth funds, and other institutional investors. The Wealth Management segment offers trust, investment management, custody, and philanthropic; financial consulting; guardianship and estate administration; family business consulting; family financial education; brokerage services; and private and business banking services. This segment serves high-net-worth individuals and families, business owners, executives, professionals, retirees, and established privately held businesses. The company also provides asset management services, such as active and passive equity; active and passive fixed income; cash management; muti-asset and alternative asset classes comprising private equity and hedge funds of funds; and multi-manager advisory services and products through separately managed accounts, bank common and collective funds, registered investment companies, exchange traded funds, non-U.S. collective investment funds, and unregistered private investment funds. In addition, it offers overlay and other risk management services. Northern Trust Corporation was founded in 1889 and is headquartered in Chicago, Illinois.

About Unity Bancorp

Unity Bancorp, Inc. operates as a bank holding company for Unity Bank that provides range of commercial and retail banking services to individuals, small and medium sized businesses, and professional communities. It offers personal and business checking accounts, time deposits, money market accounts, savings accounts, and retirement accounts, as well as noninterest and interest-bearing demand deposits. The company also provides small business administration loans; commercial loans; and residential mortgage and consumer loans, including residential real estate, home equity lines and loans, and residential construction lines, as well as personal loans. In addition, it offers credit and debit cards, wire transfer, safe deposit box, automated teller, and internet and mobile banking services; and automated clearing house origination and remote deposit capture services. Unity Bancorp, Inc. was incorporated in 1991 and is headquartered in Clinton, New Jersey.