Comparing Potomac Bancshares (OTCMKTS:PTBS) and Hanover Bancorp (NASDAQ:HNVR)

Potomac Bancshares (OTCMKTS:PTBS) and Hanover Bancorp (NASDAQ:HNVR) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, profitability, valuation, institutional ownership, dividends, risk and analyst recommendations.

Profitability

This table compares Potomac Bancshares and Hanover Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Potomac Bancshares	N/A	N/A	N/A
Hanover Bancorp	5.53%	5.09%	0.42%

Dividends

Potomac Bancshares pays an annual dividend of $0.60 per share and has a dividend yield of 2.6%. Hanover Bancorp pays an annual dividend of $0.40 per share and has a dividend yield of 1.7%. Potomac Bancshares pays out 25.4% of its earnings in the form of a dividend. Hanover Bancorp pays out 38.1% 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. Potomac Bancshares is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

Potomac Bancshares has a beta of 0.26, meaning that its share price is 74% less volatile than the S&P 500. Comparatively, Hanover Bancorp has a beta of 0.11, meaning that its share price is 89% less volatile than the S&P 500.

Earnings & Valuation

This table compares Potomac Bancshares and Hanover Bancorp”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Potomac Bancshares	$54.90 million	1.91	$10.60 million	$2.36	9.87
Hanover Bancorp	$143.32 million	1.20	$7.49 million	$1.05	22.80

Potomac Bancshares has higher earnings, but lower revenue than Hanover Bancorp. Potomac Bancshares is trading at a lower price-to-earnings ratio than Hanover Bancorp, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

5.3% of Potomac Bancshares shares are held by institutional investors. Comparatively, 15.0% of Hanover Bancorp shares are held by institutional investors. 4.4% of Potomac Bancshares shares are held by insiders. Comparatively, 24.4% of Hanover Bancorp shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Potomac Bancshares and Hanover Bancorp, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Potomac Bancshares	0	0	0	0	0.00
Hanover Bancorp	1	3	1	0	2.00

Hanover Bancorp has a consensus price target of $24.33, suggesting a potential upside of 1.64%. Given Hanover Bancorp’s stronger consensus rating and higher probable upside, analysts plainly believe Hanover Bancorp is more favorable than Potomac Bancshares.

Summary

Hanover Bancorp beats Potomac Bancshares on 10 of the 16 factors compared between the two stocks.

About Potomac Bancshares

Potomac Bancshares, Inc. operates as the bank holding company for Bank of Charles Town that provides various banking products and services to individuals and businesses. The company offers checking, savings, and individual retirement accounts; and certificates of deposit (CD). It also provides personal loans, including new and used vehicle, home equity, unsecured home improvement and personal, retail equipment, and lot loans, as well as loans secured by CD, and home equity lines of credit; commercial loans for building or office purchases, commercial real estate and construction, and production and administrative equipment purchases; lines of credit; mortgage, commercial, term, residential and commercial construction, commercial real estate, and agricultural loans; and credit and debit cards. In addition, the company offers Card Pay, cash management, merchant, financial planning, trust and estate, investment management, wealth management, full-service brokerage, retirement and insurance planning and products, asset allocation and management, and college planning services, as well as telephone, mobile, and online banking services. Potomac Bancshares, Inc. was founded in 1871 and is based in Charles Town, West Virginia.

About Hanover Bancorp

Hanover Bancorp, Inc., a bank holding company for Hanover Community Bank, provides personal and business lending and deposit services to businesses, municipalities, and individuals in the New York metro area. The company offers checking, credit cards, debit cards, money market, savings, government and municipal banking, and professional services, as well as time deposits, including certificate of deposit and individual retirement accounts. It also provides business loans, commercial real estate financing, small business administration, lending directory services, and residential mortgage. In addition, the company offers cash management, online and mobile banking, merchant services, and digital solutions. Its banking offices are located in Nassau, Suffolk, Queens, Kings, New York Counties, New York, Monmouth County, Freehold, and New Jersey. The company was founded in 2008 and is headquartered in Mineola, New York.