Critical Review: State Street (NYSE:STT) and MainStreet Bancshares (NASDAQ:MNSB)

State Street (NYSE:STT) and MainStreet Bancshares (NASDAQ:MNSB) are both finance companies, but which is the better business? We will compare the two companies based on the strength of their earnings, risk, institutional ownership, profitability, valuation, analyst recommendations and dividends.

Earnings and Valuation

This table compares State Street and MainStreet Bancshares”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
State Street	$12.55 billion	2.35	$1.94 billion	$6.33	15.87
MainStreet Bancshares	$66.55 million	2.34	$26.58 million	$1.20	17.05

State Street has higher revenue and earnings than MainStreet Bancshares. State Street is trading at a lower price-to-earnings ratio than MainStreet Bancshares, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares State Street and MainStreet Bancshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
State Street	9.87%	12.02%	0.82%
MainStreet Bancshares	8.34%	5.77%	0.54%

Dividends

State Street pays an annual dividend of $3.04 per share and has a dividend yield of 3.0%. MainStreet Bancshares pays an annual dividend of $0.40 per share and has a dividend yield of 2.0%. State Street pays out 48.0% of its earnings in the form of a dividend. MainStreet Bancshares pays out 33.3% 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. State Street has raised its dividend for 13 consecutive years. State Street is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

87.4% of State Street shares are held by institutional investors. Comparatively, 52.3% of MainStreet Bancshares shares are held by institutional investors. 0.3% of State Street shares are held by company insiders. Comparatively, 9.2% of MainStreet 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.

Volatility & Risk

State Street has a beta of 1.44, meaning that its share price is 44% more volatile than the S&P 500. Comparatively, MainStreet Bancshares has a beta of 0.58, meaning that its share price is 42% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings for State Street and MainStreet Bancshares, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
State Street	2	4	7	0	2.38
MainStreet Bancshares	0	0	0	0	0.00

State Street currently has a consensus target price of $97.32, indicating a potential downside of 3.14%. Given State Street’s stronger consensus rating and higher probable upside, analysts clearly believe State Street is more favorable than MainStreet Bancshares.

Summary

State Street beats MainStreet Bancshares on 14 of the 17 factors compared between the two stocks.

About State Street

State Street Corporation, through its subsidiaries, provides a range of financial products and services to institutional investors worldwide. The company offers investment servicing products and services, including custody, accounting, regulatory reporting, investor, and performance and analytics; middle office products, such as IBOR, transaction management, loans, cash, derivatives and collateral, record keeping, and client reporting and investment analytics; finance leasing; foreign exchange, and brokerage and other trading services; securities finance and enhanced custody products; deposit and short-term investment facilities; investment manager and alternative investment manager operations outsourcing; performance, risk, and compliance analytics; and financial data management to support institutional investors. It also engages in the provision of portfolio management and risk analytics, as well as trading and post-trade settlement services with integrated compliance and managed data. In addition, the company offers investment management strategies and products, such as core and enhanced indexing, multi-asset strategies, active quantitative and fundamental active capabilities, and alternative investment strategies. Further, it provides services and solutions, including environmental, social, and governance investing; defined benefit and defined contribution; and global fiduciary solutions, as well as exchange-traded funds under the SPDR ETF brand. The company provides its products and services to mutual funds, collective investment funds, UCITS, hedge funds and other investment pools, corporate and public retirement plans, insurance companies, foundations, endowments, and investment managers. State Street Corporation was founded in 1792 and is headquartered in Boston, Massachusetts.

About MainStreet Bancshares

MainStreet Bancshares, Inc. operates as the bank holding company for MainStreet Bank that provides various banking products and services for individuals, small to medium-sized businesses, and professional service organizations. The company offers demand, NOW, money market, savings, and sweep accounts, as well as certificates of deposit; business and consumer checking, interest-bearing checking, business account analysis, and other depository services; and cash management, wire transfer, check imaging, bill pay, remote deposit capture, and courier services. It also provides commercial loans, include government contract receivables, plant and equipment, general working capital, contract administration, and acquisition loans; commercial real estate, real estate construction, and residential real estate loans; and consumer loans comprising term loans and overdraft protection, as well as debit and credit cards. In addition, the company offers deposit insurance solutions; remote deposit of checks; and internet bill payment, online cash management, and online and mobile banking services. It operates in Herndon, Fairfax, McLean, Leesburg, Clarendon, and Washington D.C., as well as automated teller machines. The company was incorporated in 2003 and is headquartered in Fairfax, Virginia.