As of July 16, 2023, Unity Bancorp Inc (UNTY, Financial) trades at $24.35, marking a 5.37% change for the day. With a market capitalization of $245.2 million, the company appears to be modestly undervalued according to its GF Value of $29.72. This implies a potential for higher returns in the long term, considering the company's business growth.
Unity Bancorp Inc is a bank holding company that primarily operates through Unity Bank. The company offers a range of services, including personal and business checking accounts, time deposits, money market accounts, and regular savings accounts. It caters to small and medium-sized businesses, professionals, and individuals in its service area, offering a variety of lending activities and loan types.
GF Value: An Indicator of Intrinsic Worth
The GF Value is a unique valuation tool that estimates a stock's fair value based on historical trading multiples, past performance, and future business performance estimates. If a stock's price significantly surpasses the GF Value Line, it is considered overvalued and likely to yield poor future returns. Conversely, if it is significantly below the GF Value Line, its future returns will likely be higher. In the case of Unity Bancorp, the stock appears modestly undervalued at its current price.
Financial Strength: A Crucial Factor for Investors
Investing in financially weak companies carries a higher risk of capital loss. Therefore, it's crucial to thoroughly assess a company's financial strength before investing. Unity Bancorp's cash-to-debt ratio stands at 0.33, ranking lower than 79.99% of companies in the Banks industry, indicating a poor financial strength.
Profitability: An Indicator of Investment Quality
Companies with consistent profitability over the long term generally offer less risk to investors. Unity Bancorp has been profitable over the past 10 years, with an operating margin of 0%, which ranks lower than the industry average. Despite this, its overall profitability is fair.
Growth: A Key Factor in Valuation
The growth of a company is closely linked to the long-term performance of its stock. Unity Bancorp's 3-year average annual revenue growth rate is 15.1%, ranking better than 83.05% of companies in the Banks industry. However, its EBITDA growth rate ranks lower, indicating a need for improvement.
ROIC vs WACC: A Measure of Profitability
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) can provide insights into its profitability. Unity Bancorp's ROIC and WACC for the past 12 months stand at 0 and 7.74, respectively, indicating a need for improvement in creating value for shareholders.
Conclusion
In conclusion, Unity Bancorp (UNTY, Financial) stock appears to be modestly undervalued. Despite its poor financial condition, the company's fair profitability and growth potential make it an interesting consideration for investors. For a more in-depth look at Unity Bancorp's financials, you can check out its 30-Year Financials here.
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