Critical Survey: Norwood Financial (NASDAQ:NWFL) versus Enterprise Financial Services (NASDAQ:EFSC)

Norwood Financial (NASDAQ:NWFL) and Enterprise Financial Services (NASDAQ:EFSC) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, valuation, risk, dividends, profitability and analyst recommendations.

Valuation & Earnings

This table compares Norwood Financial and Enterprise Financial Services”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Norwood Financial	$68.61 million	3.46	$16.76 million	$1.91	15.36
Enterprise Financial Services	$534.27 million	3.69	$194.06 million	$4.72	11.17

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

Profitability

This table compares Norwood Financial and Enterprise Financial Services’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Norwood Financial	11.52%	7.40%	0.59%
Enterprise Financial Services	19.73%	10.97%	1.25%

Institutional & Insider Ownership

28.1% of Norwood Financial shares are owned by institutional investors. Comparatively, 72.2% of Enterprise Financial Services shares are owned by institutional investors. 9.1% of Norwood Financial shares are owned by insiders. Comparatively, 2.3% of Enterprise Financial Services shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Dividends

Norwood Financial pays an annual dividend of $1.20 per share and has a dividend yield of 4.1%. Enterprise Financial Services pays an annual dividend of $1.12 per share and has a dividend yield of 2.1%. Norwood Financial pays out 62.8% of its earnings in the form of a dividend. Enterprise Financial Services pays out 23.7% 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. Norwood Financial has increased its dividend for 6 consecutive years. Norwood Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Norwood Financial and Enterprise Financial Services, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Norwood Financial	0	0	0	0	N/A
Enterprise Financial Services	0	0	3	0	3.00

Enterprise Financial Services has a consensus price target of $52.00, suggesting a potential downside of 1.37%. Given Enterprise Financial Services’ higher probable upside, analysts clearly believe Enterprise Financial Services is more favorable than Norwood Financial.

Risk & Volatility

Norwood Financial has a beta of 0.63, indicating that its share price is 37% less volatile than the S&P 500. Comparatively, Enterprise Financial Services has a beta of 0.97, indicating that its share price is 3% less volatile than the S&P 500.

Summary

Enterprise Financial Services beats Norwood Financial on 12 of the 16 factors compared between the two stocks.

About Norwood Financial

Norwood Financial Corp. operates as the bank holding company for Wayne Bank that provides various banking products and services. The company accepts a range of deposit products, including interest-bearing and non-interest-bearing transaction accounts, and statement savings and money market accounts, as well as certificate of deposits. It also provides commercial loans comprising lines of credit, revolving credit, term loans, mortgages, secured lending products, and letter of credit facilities; municipal finance lending; construction loans for commercial construction projects and single-family residences; land loans; construction financing; consumer loans; mortgage lending to finance principal residences and second home dwellings; and indirect dealer financing of new and used automobiles, boats, and recreational vehicles. In addition, the company offers investment securities services; personal and business credit services; trust and investment products; and cash management, direct deposit, remote deposit capture, mobile deposit capture, automated clearing house activity, real estate settlement, and Internet and mobile banking services. Further, it engages in the annuity and mutual fund sale, and discount brokerage activities, as well as insurance agency business. The company serves consumers, businesses, nonprofit organizations, and municipalities. It operates branches in Northeastern Pennsylvania; and in Delaware, Sullivan, Ontario, Otsego, and Yates Counties, New York, as well as automated teller machines. Norwood Financial Corp. was founded in 1870 and is headquartered in Honesdale, Pennsylvania.

About Enterprise Financial Services

Enterprise Financial Services Corp operates as the holding company for Enterprise Bank & Trust that offers banking and wealth management services to individuals and corporate customers primarily in Arizona, California, Florida, Kansas, Missouri, Nevada, and New Mexico. It provides checking, savings, money market accounts, and certificates of deposit. The company also provides commercial and industrial, commercial real estate, real estate construction and development, residential real estate, small business administration, agricultural, consumer, and other loan products. In addition, it offers treasury management and international trade services; tax credit brokerage services; life insurance premium and sponsor finance; tax credit related lending; other deposit accounts, such as community associations, property management, third party escrow, and trust services; treasury management product and services; customized solutions and products; cash management; fiduciary, investment management, and financial advisory services; and customer hedging products, including international banking, card services, and tax credit businesses. Further, the company provides online, device applications, text, and voice banking; remote deposit capture; internet banking, mobile banking, cash management, positive pay services, fraud detection and prevention, automated payables, check image, and statement and document imaging; and controlled disbursements, repurchase agreements, and sweep investment accounts. Enterprise Financial Services Corp was founded in 1988 and is headquartered in Clayton, Missouri.