Financial Analysis: Meridian Bancorp (NASDAQ:EBSB) versus Investors Bancorp (ISBC)

Meridian Bancorp (NASDAQ: EBSB) and Investors Bancorp (NASDAQ:ISBC) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, earnings, valuation, analyst recommendations, institutional ownership, profitabiliy and dividends.

Analyst Ratings

This is a summary of current recommendations and price targets for Meridian Bancorp and Investors Bancorp, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Meridian Bancorp 0 2 1 0 2.33
Investors Bancorp 1 1 3 0 2.40

Meridian Bancorp presently has a consensus target price of $19.67, indicating a potential upside of 15.01%. Investors Bancorp has a consensus target price of $14.50, indicating a potential upside of 9.77%. Given Meridian Bancorp’s higher probable upside, equities analysts clearly believe Meridian Bancorp is more favorable than Investors Bancorp.

Volatility & Risk

Meridian Bancorp has a beta of 0.26, indicating that its share price is 74% less volatile than the S&P 500. Comparatively, Investors Bancorp has a beta of 0.71, indicating that its share price is 29% less volatile than the S&P 500.

Dividends

Meridian Bancorp pays an annual dividend of $0.16 per share and has a dividend yield of 0.9%. Investors Bancorp pays an annual dividend of $0.32 per share and has a dividend yield of 2.4%. Meridian Bancorp pays out 23.2% of its earnings in the form of a dividend. Investors Bancorp pays out 50.0% 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 & Insider Ownership

65.5% of Meridian Bancorp shares are held by institutional investors. Comparatively, 76.1% of Investors Bancorp shares are held by institutional investors. 5.1% of Meridian Bancorp shares are held by company insiders. Comparatively, 3.0% of Investors Bancorp shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Earnings and Valuation

This table compares Meridian Bancorp and Investors Bancorp’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Meridian Bancorp $135.37 million 6.44 $35.15 million $0.69 24.78
Investors Bancorp $672.19 million 5.85 $190.52 million $0.64 20.64

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

Profitability

This table compares Meridian Bancorp and Investors Bancorp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Meridian Bancorp 20.81% 5.97% 0.84%
Investors Bancorp 21.92% 5.95% 0.82%

About Meridian Bancorp

Meridian Bancorp Inc, formerly Meridian Interstate Bancorp, Inc., is a mid-tier stock holding company of East Boston Savings Bank (the Bank). The Bank is a state-chartered stock savings bank that operates from 24 full-service locations and two loan centers in the Boston metropolitan area. East Boston Savings Bank operates eight of its full-service locations and a loan center under the name Mt. Washington Bank, a division of East Boston Savings Bank. The Bank offers a variety of deposit and loan products to individuals and businesses located in its primary market, which consists of Suffolk, Middlesex and Essex Counties, Massachusetts. The Bank operates as a community-oriented financial institution offering financial services to consumers and businesses. As of December 31, 2011, Meridian Financial Services, Incorporated owned 59.4% interest of the Company.

About Investors Bancorp

Investors Bancorp, Inc. is a holding company for Investors Bank (the Bank). The Bank is a chartered savings bank. The Company is in the business of attracting deposits from the public through its branch network and borrowing funds in the wholesale markets to originate loans and to invest in securities. It originates mortgage loans secured by one-to four-family residential real estate loans, multi-family loans, commercial real estate loans, construction loans, commercial and industrial loans and consumer loans, the majority of which are home equity loans and home equity lines of credit. Securities, primarily United States Government and Federal Agency obligations, mortgage-backed and other securities represented 12.3% of its assets as of December 31, 2012. In December 2013, Investors Bancorp Inc completed its acquisition of Roma Financial Corp, and its subsidiary banks, Roma Bank and RomAsia Bank. In January 2014, Investors Bancorp Inc acquired Gateway Community Financial Corp.

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