Critical Analysis: Bank of America (NYSE:BAC) and Shore Bancshares (NASDAQ:SHBI)

Bank of America (NYSE:BAC) and Shore Bancshares (NASDAQ:SHBI) are both finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their institutional ownership, dividends, analyst recommendations, profitability, risk, valuation and earnings.

Analyst Ratings

This is a breakdown of current ratings and target prices for Bank of America and Shore Bancshares, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bank of America	1	5	15	3	2.83
Shore Bancshares	0	1	2	0	2.67

Bank of America presently has a consensus price target of $48.31, indicating a potential upside of 34.44%. Shore Bancshares has a consensus price target of $20.00, indicating a potential upside of 69.78%. Given Shore Bancshares’ higher possible upside, analysts plainly believe Shore Bancshares is more favorable than Bank of America.

Institutional and Insider Ownership

70.7% of Bank of America shares are held by institutional investors. Comparatively, 59.8% of Shore Bancshares shares are held by institutional investors. 0.3% of Bank of America shares are held by company insiders. Comparatively, 8.6% of Shore Bancshares shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares Bank of America and Shore Bancshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bank of America	14.10%	10.29%	0.84%
Shore Bancshares	13.44%	10.40%	0.93%

Risk and Volatility

Bank of America has a beta of 1.24, indicating that its stock price is 24% more volatile than the S&P 500. Comparatively, Shore Bancshares has a beta of 0.86, indicating that its stock price is 14% less volatile than the S&P 500.

Dividends

Bank of America pays an annual dividend of $1.04 per share and has a dividend yield of 2.9%. Shore Bancshares pays an annual dividend of $0.48 per share and has a dividend yield of 4.1%. Bank of America pays out 32.3% of its earnings in the form of a dividend. Shore Bancshares pays out 36.1% 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. Bank of America has increased its dividend for 11 consecutive years.

Valuation and Earnings

This table compares Bank of America and Shore Bancshares”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bank of America	$101.89 billion	2.68	$27.13 billion	$3.22	11.16
Shore Bancshares	$201.70 million	1.95	$43.89 million	$1.33	8.86

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

Summary

Bank of America beats Shore Bancshares on 13 of the 18 factors compared between the two stocks.

About Bank of America

Bank of America Corporation, through its subsidiaries, provides banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide. It operates in four segments: Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking, and Global Markets. The Consumer Banking segment offers traditional and money market savings accounts, certificates of deposit and IRAs, non-interest and interest-bearing checking accounts, and investment accounts and products; credit and debit cards; residential mortgages, and home equity loans; and direct and indirect loans, such as automotive, recreational vehicle, and consumer personal loans. The GWIM segment provides investment management, brokerage, banking, and trust and retirement products and services; wealth management solutions; and customized solutions, including specialty asset management services. The Global Banking segment offers lending products and services, including commercial loans, leases, commitment facilities, trade finance, and commercial real estate and asset-based lending; treasury solutions, such as treasury management, foreign exchange, short-term investing options, and merchant services; working capital management solutions; debt and equity underwriting and distribution, and merger-related and other advisory services; and fixed-income and equity research, and certain market-based services. The Global Markets segment provides market-making, financing, securities clearing, settlement, and custody services; securities and derivative products; and risk management products using interest rate, equity, credit, currency and commodity derivatives, foreign exchange, fixed-income, and mortgage-related products. Bank of America Corporation was founded in 1784 and is based in Charlotte, North Carolina.

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.