Great Western Bancorp (NYSE:GWB) and Live Oak Bancshares (NASDAQ:LOB) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, earnings, analyst recommendations, risk, valuation, dividends and institutional ownership.

Analyst Recommendations

This is a breakdown of recent recommendations for Great Western Bancorp and Live Oak Bancshares, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Great Western Bancorp 0 3 2 0 2.40
Live Oak Bancshares 0 0 1 0 3.00

Great Western Bancorp currently has a consensus target price of $36.00, indicating a potential upside of 17.53%. Live Oak Bancshares has a consensus target price of $22.00, indicating a potential upside of 22.02%. Given Live Oak Bancshares’ stronger consensus rating and higher probable upside, analysts clearly believe Live Oak Bancshares is more favorable than Great Western Bancorp.

Dividends

Great Western Bancorp pays an annual dividend of $1.20 per share and has a dividend yield of 3.9%. Live Oak Bancshares pays an annual dividend of $0.12 per share and has a dividend yield of 0.7%. Great Western Bancorp pays out 40.8% of its earnings in the form of a dividend. Live Oak Bancshares pays out 27.3% 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. Great Western Bancorp has raised its dividend for 4 consecutive years and Live Oak Bancshares has raised its dividend for 3 consecutive years. Great Western Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Great Western Bancorp and Live Oak Bancshares’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Great Western Bancorp 27.38% 8.77% 1.29%
Live Oak Bancshares 6.10% 3.69% 0.44%

Volatility & Risk

Great Western Bancorp has a beta of 1.62, suggesting that its share price is 62% more volatile than the S&P 500. Comparatively, Live Oak Bancshares has a beta of 1.07, suggesting that its share price is 7% more volatile than the S&P 500.

Institutional and Insider Ownership

97.0% of Great Western Bancorp shares are held by institutional investors. Comparatively, 42.6% of Live Oak Bancshares shares are held by institutional investors. 0.4% of Great Western Bancorp shares are held by company insiders. Comparatively, 25.9% of Live Oak Bancshares shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares Great Western Bancorp and Live Oak Bancshares’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Great Western Bancorp $603.65 million 2.86 $167.37 million $2.94 10.42
Live Oak Bancshares $295.86 million 2.46 $18.03 million $0.44 40.98

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

Summary

Great Western Bancorp beats Live Oak Bancshares on 12 of the 17 factors compared between the two stocks.

About Great Western Bancorp

Great Western Bancorp, Inc. operates as the bank holding company for Great Western Bank that provides business and agri-business banking, retail banking, and wealth management services in the United States. The company offers noninterest-bearing demand accounts, interest-bearing demand accounts, interest-bearing non-transaction accounts, time deposits, and corporate credit cards. It also provides commercial real estate (CRE) loans, including owner-occupied and non-owner-occupied CRE loans, multifamily residential real estate loans, and construction and development loans; commercial non-real estate loans, such as working capital and other shorter-term lines of credit, and fixed-rate loans; short-term working capital funding, long-term land-related lending, and other tailored services to agri-businesses; and residential mortgage, home equity, auto, and other loans, as well as home equity and general lines of credit. In addition, the company offers wealth management solutions comprising financial planning, private banking, investment management, and trust services; cash management, online business deposit, and wire transfer services; crop insurance; and online, telephone, and mobile banking services. It primarily serves hospitality/tourism, agri-business, freight and transport, and healthcare sectors. As of September 30, 2018, the company's branch network consisted of 174 branch offices located in 130 communities in Arizona, Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota, as well as operated 163 ATMs and 11 company-owned ATMs at off-site locations. Great Western Bancorp, Inc. was founded in 1935 and is headquartered in Sioux Falls, South Dakota.

About Live Oak Bancshares

Live Oak Bancshares, Inc. operates as the bank holding company for Live Oak Banking Company that provides various commercial banking products and services to individuals, small businesses, and professionals in North Carolina, the United States. The company accepts various deposit products, including noninterest-bearing demand, interest-bearing checking, money market, savings, and time deposits. It also offers commercial and industrial loans; construction and development loans; owner occupied and non-owner occupied collateral commercial real estate loans; and commercial land loans. In addition, the company provides settlement, accounting, and securitization services for government guaranteed loans; and wealth and investment management services to high-net-worth individuals and families. Live Oak Bancshares, Inc. was founded in 2008 and is headquartered in Wilmington, North Carolina.

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