Contrasting VersaBank (NASDAQ:VBNK) and Suruga Bank (OTCMKTS:SUGBY)

Suruga Bank (OTCMKTS:SUGBY) and VersaBank (NASDAQ:VBNK) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, analyst recommendations, profitability, dividends, institutional ownership, earnings and valuation.

Analyst Ratings

This is a summary of recent recommendations and price targets for Suruga Bank and VersaBank, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Suruga Bank	0	0	0	0	N/A
VersaBank	0	0	1	0	3.00

VersaBank has a consensus price target of $10.00, indicating a potential downside of 16.59%. Given VersaBank’s higher possible upside, analysts clearly believe VersaBank is more favorable than Suruga Bank.

Dividends

Suruga Bank pays an annual dividend of $1.33 per share and has a dividend yield of 1.8%. VersaBank pays an annual dividend of $0.07 per share and has a dividend yield of 0.6%. Suruga Bank pays out 25.4% of its earnings in the form of a dividend. VersaBank pays out 5.3% 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.

Risk & Volatility

Suruga Bank has a beta of -0.07, indicating that its stock price is 107% less volatile than the S&P 500. Comparatively, VersaBank has a beta of 0.77, indicating that its stock price is 23% less volatile than the S&P 500.

Profitability

This table compares Suruga Bank and VersaBank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Suruga Bank	16.87%	5.70%	0.46%
VersaBank	17.02%	12.26%	1.11%

Insider and Institutional Ownership

56.9% of VersaBank shares are held by institutional investors. 5.3% of VersaBank shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares Suruga Bank and VersaBank’s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Suruga Bank	$633.45 million	2.25	$106.09 million	$5.24	13.78
VersaBank	$176.45 million	1.76	$31.26 million	$1.32	9.08

Suruga Bank has higher revenue and earnings than VersaBank. VersaBank is trading at a lower price-to-earnings ratio than Suruga Bank, indicating that it is currently the more affordable of the two stocks.

Summary

VersaBank beats Suruga Bank on 9 of the 15 factors compared between the two stocks.

About Suruga Bank

Suruga Bank Ltd. provides various banking and financial products and services to individuals and corporate customers in Japan. The company offers deposit products, such as time, ordinary, savings, foreign currency, and other deposits, as well as current and general accounts; card, housing, second house, startup, and business up term loans, as well as loans by purpose; credit and debit cards; overdrafts; and other financing products. It also provides investment trust, public bond, pension contribution, insurance, inheritance/trust, lottery, foreign currency, pay-easy, web direct, safe deposit box, external linkage, foreign remittance, fund management, e-combination, payment, nursing care/medical care/dispensing compensation receivable factoring, mortgage, and Internet and telephone banking services. In addition, the company offers staffing, money lending, guarantee, printing, leasing, and agency services. The company was incorporated in 1895 and is headquartered in Numazu, Japan.

About VersaBank

VersaBank provides various banking products and services in Canada and the United States. It offers deposit products, such as web-based chequing accounts, guaranteed investment certificates, registered retirement savings plans, and tax-free savings accounts, as well as deposit insurance products. The company also provides lending services, including point of sale financing that covers purchasing loan and lease receivables from finance companies operating in various industries; commercial banking services comprising commercial real estate, public sector/infrastructure financing, and condominium financing; and residential mortgages. In addition, it offers cybersecurity services. The company was formerly known as Pacific & Western Bank of Canada and changed its name to VersaBank in May 2016. VersaBank was incorporated in 1979 and is headquartered in London, Canada.