Critical Review: Ottawa Bancorp (OTCMKTS:OTTW) & Provident Financial Services (NYSE:PFS)

Ottawa Bancorp (OTCMKTS:OTTW) and Provident Financial Services (NYSE:PFS) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, analyst recommendations, valuation, dividends, risk, profitability and earnings.

Analyst Ratings

This is a summary of current ratings and price targets for Ottawa Bancorp and Provident Financial Services, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ottawa Bancorp	0	0	0	0	N/A
Provident Financial Services	0	0	3	0	3.00

Provident Financial Services has a consensus price target of $20.67, indicating a potential upside of 15.91%. Given Provident Financial Services’ higher probable upside, analysts clearly believe Provident Financial Services is more favorable than Ottawa Bancorp.

Profitability

This table compares Ottawa Bancorp and Provident Financial Services’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ottawa Bancorp	4.46%	1.81%	0.21%
Provident Financial Services	9.38%	4.95%	0.56%

Volatility and Risk

Ottawa Bancorp has a beta of 0.36, suggesting that its stock price is 64% less volatile than the S&P 500. Comparatively, Provident Financial Services has a beta of 1.03, suggesting that its stock price is 3% more volatile than the S&P 500.

Insider and Institutional Ownership

72.0% of Provident Financial Services shares are owned by institutional investors. 7.8% of Ottawa Bancorp shares are owned by insiders. Comparatively, 4.3% of Provident Financial Services shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Ottawa Bancorp and Provident Financial Services”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ottawa Bancorp	$16.45 million	2.21	$1.67 million	$0.60	24.42
Provident Financial Services	$695.65 million	3.34	$128.40 million	$1.60	11.14

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

Dividends

Ottawa Bancorp pays an annual dividend of $0.44 per share and has a dividend yield of 3.0%. Provident Financial Services pays an annual dividend of $0.96 per share and has a dividend yield of 5.4%. Ottawa Bancorp pays out 73.3% of its earnings in the form of a dividend. Provident Financial Services pays out 60.0% 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. Provident Financial Services is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Provident Financial Services beats Ottawa Bancorp on 13 of the 15 factors compared between the two stocks.

About Ottawa Bancorp

Ottawa Bancorp, Inc. operates as the bank holding company for OSB Community Bank, a savings bank that provides various financial services to individual and corporate customers in Illinois. The company's deposit products include saving, checking, money market, and interest-bearing accounts, as well as certificate of deposit. Its loan portfolio comprises commercial, non-residential real estate, one-to-four family residential, multi-family residential, consumer direct, and purchased auto loans; business and construction loans; motor vehicle, home improvement, share, and personal unsecured loans, as well as home equity and small personal credit lines; mortgage loans; and student loans. The company also provides cash management solutions, such as remote deposit capture, automated clearing house/payroll direct deposit, and merchant services, as well as commercial leasing services. In addition, it offers notary, lamination, night depository, document faxing, money gift envelopes, safe deposit boxes, and coin counting, as well as debit and credit cards, and digital banking services. The company was formerly known as Ottawa Savings Bancorp, Inc. and changed its name to Ottawa Bancorp, Inc. in October 2016. Ottawa Bancorp, Inc. was founded in 1871 and is based in Ottawa, Illinois.

About Provident Financial Services

Provident Financial Services, Inc. operates as the bank holding company for Provident Bank that provides various banking products and services to individuals, families, and businesses in the United States. Its deposit products include savings, checking, interest-bearing checking, money market deposit, and certificate of deposit accounts, as well as IRA products. The company's loan portfolio comprises commercial real estate loans that are secured by properties, such as multi-family apartment buildings, office buildings, retail and industrial properties, and office buildings; commercial business loans; fixed-rate and adjustable-rate mortgage loans collateralized by one- to four-family residential real estate properties; commercial construction loans; and consumer loans consisting of home equity loans, home equity lines of credit, personal loans and unsecured lines of credit, and auto and recreational vehicle loans. It also offers cash management, remote deposit capture, payroll origination, escrow account management, and online and mobile banking services; and business credit cards. In addition, the company provides wealth management services comprising investment management, trust and estate administration, financial planning, and tax compliance and planning. Further, it sells insurance and investment products, including annuities; operates as a real estate investment trust for acquiring mortgage loans and other real estate related assets; and manages and sells real estate properties acquired through foreclosure. The company was founded in 1839 and is headquartered in Jersey City, New Jersey.