As of July 15, 2023, the shares of Unity Bancorp Inc (UNTY, Financial) have experienced a noticeable price change of 5.37%. With a current market price of $24.35 per share, Unity Bancorp has a market cap of $245.2 million and sales of $100.8 million. Based on GuruFocus' unique GF Value indicator, the stock is modestly undervalued, with a GF Value of $29.71. This suggests that Unity Bancorp (UNTY) could potentially offer higher long-term returns due to its current undervaluation.
Unity Bancorp Inc is a bank holding company that serves as a holding company for Unity Bank. It conducts a traditional and community-oriented commercial banking business, offering services including personal and business checking accounts, time deposits, money market accounts, and regular savings accounts. The company caters to small and medium-sized businesses, professionals, and individuals in its service area. It engages in a wide range of lending activities and offers commercial, Small Business Administration, consumer, mortgage, home equity, and personal loans.
Understanding the GF Value of Unity Bancorp
The GF Value is a proprietary valuation model developed by GuruFocus, providing an estimation of the intrinsic value of a stock. The GF Value for Unity Bancorp (UNTY, Financial) is calculated based on historical trading multiples, an adjustment factor from GuruFocus based on past performance and growth, and estimates of future business performance. If the current stock price is significantly below the GF Value Line, it suggests the stock may be undervalued and poised for high future returns. In the case of Unity Bancorp, the stock appears to be modestly undervalued.
Financial Strength and Profitability of Unity Bancorp
Investors need to consider the financial strength of a company before investing, as companies with poor financial strength pose a higher risk of permanent capital loss. One way to assess this is by examining the cash-to-debt ratio. Unity Bancorp's cash-to-debt ratio of 0.33 is lower than 79.99% of companies in the Banks industry, suggesting its financial strength is relatively weak.
Profitability is another crucial factor. Unity Bancorp has been profitable over the past 10 years, with a revenue of $100.8 million and EPS of $3.7 in the past twelve months. However, its operating margin is 0%, ranking lower than other companies in the Banks industry.
Growth and ROIC vs WACC
Long-term stock performance is closely correlated with growth. The average annual revenue growth of Unity Bancorp is 15.1%, ranking better than 83.05% of companies in the Banks industry. However, its 3-year average EBITDA growth is 0%, indicating room for improvement.
Comparing a company's return on invested capital (ROIC) to its weighted cost of capital (WACC) is another way to evaluate its profitability. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Unity Bancorp’s ROIC was 0, while its WACC came in at 7.74.
Conclusion
In conclusion, Unity Bancorp (UNTY, Financial) stock appears to be modestly undervalued. Despite its poor financial condition, the company's profitability is fair, and its growth ranks better than many other companies in the Banks industry. For more detailed financial information about Unity Bancorp, you can check out its 30-Year Financials here.
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