As of July 14, 2023, Unity Bancorp Inc (UNTY, Financial) is trading at $24.35, marking a 5.37% increase. The stock, with a market capitalization of $245.2 million, is considered modestly undervalued according to the GF Value of $29.7. Unity Bancorp's history of providing traditional and community-oriented commercial banking services, coupled with its EPS of $3.7, paints an intriguing picture for potential investors.
Unity Bancorp Inc, serving as the holding entity for Unity Bank, offers a range of services including personal and business checking accounts, time deposits, money market accounts, and regular savings accounts. The company's approach is designed to attract small and medium-sized businesses, professionals, and individuals within its service area, offering a broad spectrum of lending activities like commercial, Small Business Administration, consumer, mortgage, home equity, and personal loans.
Unity Bancorp's Valuation
Unity Bancorp (UNTY, Financial) is estimated to be modestly undervalued, according to GuruFocus' unique GF Value indicator. This assessment is based on historical trading multiples, past business growth, and future performance estimates. A stock trading significantly above the GF Value Line is considered overvalued and likely to offer poor future returns. Conversely, a stock trading below the GF Value Line is likely to yield higher future returns. Given Unity Bancorp's current price and market cap, the stock seems to hold potential for higher long-term returns, given its relative undervaluation.
Financial Strength Analysis
Investors must consider a company's financial strength to avoid potential capital loss. Key indicators such as the cash-to-debt ratio and interest coverage provide insights into this aspect. Unity Bancorp's cash-to-debt ratio of 0.33 ranks lower than 79.99% of companies in the banking industry, and its overall financial strength is rated 3 out of 10, indicating poor financial health.
Profitability Assessment
Investing in profitable companies is less risky, especially if they demonstrate consistent profitability. Unity Bancorp, having been profitable 10 out of the past 10 years, shows promising signs. Over the past twelve months, the company had a revenue of $100.8 million and an EPS of $3.7. However, its operating margin of 0% ranks lower than most companies in the banking industry. Overall, Unity Bancorp's profitability is ranked 6 out of 10, indicating fair profitability.
Growth Evaluation
Growth is a crucial factor in company valuation, often correlating with long-term stock performance. Unity Bancorp's 3-year average annual revenue growth is 15.1%, outperforming 83.05% of companies in the banking industry. However, its 3-year average EBITDA growth rate is 0%, lagging behind its industry peers.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) can provide another perspective on profitability. Over the past 12 months, Unity Bancorp's ROIC was 0, while its WACC stood at 7.74, indicating that the company might not be creating value for shareholders.
Conclusion
In conclusion, Unity Bancorp (UNTY, Financial) appears to be modestly undervalued. Despite its poor financial condition, its profitability is fair, and its growth ranks better than most companies in the banking industry. For more in-depth information about Unity Bancorp stock, check out its 30-Year Financials here.
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