VersaBank (NASDAQ:VBNK) versus Suruga Bank (OTCMKTS:SUGBY) Critical Survey

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

Volatility & Risk

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

Earnings and Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
VersaBank	$176.45 million	1.71	$31.26 million	$1.32	8.80
Suruga Bank	$633.45 million	2.25	$106.09 million	$5.24	13.78

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.

Analyst Ratings

This is a breakdown of current ratings and price targets for VersaBank and Suruga Bank, as provided by MarketBeat.com.

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

VersaBank currently has a consensus target price of $10.00, indicating a potential downside of 13.94%. Given VersaBank’s higher probable upside, research analysts plainly believe VersaBank is more favorable than Suruga Bank.

Profitability

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

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

Dividends

VersaBank pays an annual dividend of $0.07 per share and has a dividend yield of 0.6%. Suruga Bank pays an annual dividend of $1.34 per share and has a dividend yield of 1.9%. VersaBank pays out 5.3% of its earnings in the form of a dividend. Suruga Bank pays out 25.6% 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.

Institutional and Insider Ownership

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

Summary

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

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.

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.