Critical Review: Alerus Financial (NASDAQ:ALRS) vs. Atlanticus (NASDAQ:ATLC)

Alerus Financial (NASDAQ:ALRS) and Atlanticus (NASDAQ:ATLC) are both small-cap finance companies, but which is the better stock? We will compare the two companies based on the strength of their institutional ownership, dividends, earnings, risk, analyst recommendations, profitability and valuation.

Earnings and Valuation

This table compares Alerus Financial and Atlanticus”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Alerus Financial	$399.92 million	1.90	$17.44 million	$1.03	29.42
Atlanticus	$1.97 billion	0.71	$122.20 million	$6.70	13.79

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

Profitability

This table compares Alerus Financial and Atlanticus’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Alerus Financial	6.74%	14.39%	1.51%
Atlanticus	5.86%	23.43%	2.17%

Analyst Ratings

This is a breakdown of current ratings and price targets for Alerus Financial and Atlanticus, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Alerus Financial	0	4	1	2	2.71
Atlanticus	0	2	4	1	2.86

Alerus Financial presently has a consensus target price of $28.38, suggesting a potential downside of 6.35%. Atlanticus has a consensus target price of $101.25, suggesting a potential upside of 9.60%. Given Atlanticus’ stronger consensus rating and higher possible upside, analysts plainly believe Atlanticus is more favorable than Alerus Financial.

Insider and Institutional Ownership

51.3% of Alerus Financial shares are held by institutional investors. Comparatively, 14.2% of Atlanticus shares are held by institutional investors. 4.3% of Alerus Financial shares are held by insiders. Comparatively, 51.0% of Atlanticus shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Risk & Volatility

Alerus Financial has a beta of 0.69, meaning that its stock price is 31% less volatile than the S&P 500. Comparatively, Atlanticus has a beta of 2.14, meaning that its stock price is 114% more volatile than the S&P 500.

Summary

Atlanticus beats Alerus Financial on 10 of the 15 factors compared between the two stocks.

About Alerus Financial

Alerus Financial Corporation operates as the bank holding company for Alerus Financial, National Association that engages in the provision of various financial services to businesses and consumers. The company operates in four segments: Banking, Mortgage, Retirement and Benefit Services, and Wealth Management. It offers various deposit products, including demand deposits, interest-bearing transaction accounts, money market accounts, time and savings deposits, checking accounts, and certificates of deposit; and treasury management products, including electronic receivables management, remote deposit capture, cash vault services, merchant services, and other cash management services. The company also provides commercial loans, business term loans, lines of credit, and commercial real estate loans, as well as construction and land development loans; consumer lending products, including residential first mortgage loans; installment loans and lines of credit; and second mortgage loans. In addition, it offers retirement plan administration and investment advisory services, employee stock ownership plan, fiduciary services, payroll, health savings accounts, and other benefit services, as well as individual retirement accounts; and financial planning, investment management, personal and corporate trust, estate administration, and custody services. Further, the company provides debit and credit cards, online banking, mobile banking/wallet, payment, private banking, payroll accounts, flex spending accounts, administration, and government health insurance program services. It offers banking services in North Dakota, Minnesota, and Arizona; and retirement and benefit plans through offices located in Michigan, Minnesota, and Colorado. The company was formerly known as First National Bank North Dakota and changed its name to Alerus Financial Corporation in 2000. Alerus Financial Corporation was founded in 1879 and is headquartered in Grand Forks, North Dakota.

About Atlanticus

Atlanticus Holdings Corporation, a financial technology company, provides credit and related financial services and products to customers the United States. It operates in two segments, Credit as a Service, and Auto Finance. The Credit as a Service segment originates a range of consumer loan products, such as private label and general purpose credit cards originated by lenders through various channels, including retail and healthcare, direct mail solicitation, digital marketing, and partnerships with third parties; and offers credit to their customers for the purchase of various goods and services, including consumer electronics, furniture, elective medical procedures, healthcare, and home-improvements by partnering with retailers, healthcare providers, and other service providers. This segment also offers loan servicing, such as risk management and customer service outsourcing for third parties; and engages in testing and investment activities in consumer finance technology platforms. The Auto Finance segment purchases and/or services loans secured by automobiles from or for a pre-qualified network of independent automotive dealers and automotive finance companies in the buy-here, pay-here, and used car business. This segment also provides floor plan financing and installment lending products. It also invests in and services portfolios of credit card receivables. The company was founded in 1996 and is headquartered in Atlanta, Georgia.