Critical Contrast: Investar (NASDAQ:ISTR) and Isabella Bank (OTCMKTS:ISBA)

Isabella Bank (OTCMKTS:ISBA) and Investar (NASDAQ:ISTR) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their valuation, profitability, risk, institutional ownership, earnings, dividends and analyst recommendations.

Institutional & Insider Ownership

50.2% of Investar shares are owned by institutional investors. 9.7% of Isabella Bank shares are owned by company insiders. Comparatively, 8.7% of Investar shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Volatility and Risk

Isabella Bank has a beta of -0.05, suggesting that its share price is 105% less volatile than the S&P 500. Comparatively, Investar has a beta of 0.78, suggesting that its share price is 22% less volatile than the S&P 500.

Dividends

Isabella Bank pays an annual dividend of $1.12 per share and has a dividend yield of 5.3%. Investar pays an annual dividend of $0.42 per share and has a dividend yield of 2.2%. Isabella Bank pays out 52.8% of its earnings in the form of a dividend. Investar pays out 23.5% 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.

Analyst Recommendations

This is a summary of current ratings and target prices for Isabella Bank and Investar, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Isabella Bank	0	1	0	0	2.00
Investar	0	0	2	0	3.00

Isabella Bank presently has a consensus target price of $22.00, suggesting a potential upside of 4.76%. Investar has a consensus target price of $16.75, suggesting a potential downside of 13.79%. Given Isabella Bank’s higher probable upside, equities analysts clearly believe Isabella Bank is more favorable than Investar.

Valuation and Earnings

This table compares Isabella Bank and Investar”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Isabella Bank	$93.46 million	1.68	$18.17 million	$2.12	9.91
Investar	$79.24 million	2.41	$16.68 million	$1.79	10.85

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

Profitability

This table compares Isabella Bank and Investar’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Isabella Bank	14.98%	7.50%	0.72%
Investar	10.04%	6.69%	0.53%

Summary

Isabella Bank beats Investar on 9 of the 16 factors compared between the two stocks.

About Isabella Bank

Isabella Bank Corporation operates as the bank holding company for Isabella Bank that provides various banking products and services to businesses, institutions, and individuals and their families. Its deposit products include checking accounts, savings accounts, certificates of deposit, direct deposits, and money market accounts. The company's loan portfolio comprises commercial, agricultural, and residential real estate loans, as well as consumer loans, including secured and unsecured personal loans. It also offers cash management, mobile and internet banking, electronic bill pay, automated teller machines, trust and investment, estate planning, and safe deposit box rental services; and insurance products. The company operated banking offices in Clare, Gratiot, Isabella, Mecosta, Midland, Montcalm, and Saginaw counties. Isabella Bank Corporation was founded in 1903 and is headquartered in Mount Pleasant, Michigan.

About Investar

Investar Holding Corporation operates as the bank holding company for Investar Bank that provides a range of commercial banking products to individuals, professionals, and small to medium-sized businesses in south Louisiana, southeast Texas, and Alabama in the United States. The company offers various deposit products and services, such as savings, checking, money market, and individual retirement accounts, as well as various certificates of deposit; debit and credit cards; internet, mobile, and video banking services; and reciprocal deposit products. It also provides commercial real estate loans; commercial and industrial loans, including working capital lines of credit and equipment loans; loans for the construction of commercial projects, and single family residential and multifamily properties; one-to-four family residential real estate loans, such as second mortgage loans; and consumer loans, such as secured and unsecured installment and term loans, home equity loans and lines of credit, and auto loans, as well as loans for personal, family, and household purposes. In addition, the company offers treasury management products, including remote deposit capture, lockbox payment processing, virtual vault, positive pay, ACH origination, wire transfer, investment sweep accounts, and business internet banking services. Further, it provides various other banking services, such as cashiers' checks, direct deposit of payroll and social security checks, night depository, bank-by-mail, automated teller machines, electronic statements, interactive teller machines, online account opening, and mobile wallet payment services. Investar Holding Corporation was founded in 2006 and is headquartered in Baton Rouge, Louisiana.