Macroaxis Stories

Breaking down Unity volatility

July 13, 2023  By Vlad Skutelnik
Macroaxis Story
Unity Bancorp (NASDAQ:UNTY), a key player in the Banks-Regional sector, is currently on a growth trajectory. However, the question remains whether it is financially equipped to fuel this growth. With a market value of $23.11, slightly below its real value of $25.48, there is potential for an upside. The analyst consensus is a 'Buy' with three estimates, two of which are strong buys. The estimated target price stands at $28.17, with the highest estimate reaching $31.5, indicating a possible upside price of $25.69. On the other hand, the lowest estimated target price is $26, suggesting a possible downside price of $22. The daily balance of power stands at 0.33, indicating a relatively balanced market. The accumulation distribution is at a substantial 229.04, hinting at a strong buying pressure. The rate of daily change is 1, with a day typical price of $23.14 and a median price of $23.15. The naive expected forecast value is $23.85, slightly above the current market value. The price action indicator is a minimal 0.01, suggesting a steady market. The company's financial year ends in December, providing ample time to observe its performance and make an informed investment decision. However, investors should be cautious as the company's valuation hype value is $23.22, only slightly above its market value. This could indicate overhype, which may lead to potential losses. In conclusion, Unity Bancorp appears to be financially equipped to fuel its growth trajectory, with a strong buy consensus from analysts and a potential upside. However, investors should be wary of the potential downside and the possible overhype in the market. The highest estimated target price is a promising $31.5, but the final decision should be based on careful consideration of all factors. Unity Bancorp is currently generating an expected daily return of 0.103%, with an assumed risk (volatility on return distribution) of 1.8421% over a 90-day horizon. Given the excitement many adventurous traders have for the banking sector, it's only fair to analyze the risk associated with shorting Unity Bancorp, especially considering its recent volatility spike. We will examine whether the expected returns on Unity Bancorp will justify its current volatility.
Published over a year ago
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Reviewed by Ellen Johnson

Unity Bancorp currently holds $393.31 million in liabilities, with a Debt to Equity (D/E) ratio of 12.83. This suggests that Unity Bancorp might face challenges in generating sufficient cash to meet its financial obligations. While debt can be beneficial for Unity Bancorp until it encounters difficulties in paying it off, either with new capital or free cash flow, there's a risk that shareholders could end up with nothing if the company fails to meet its legal debt repayment obligations. However, a more common scenario is for companies like Unity Bancorp to issue additional shares at discounted prices, which dilutes the holdings of existing shareholders. In this context, debt can be an excellent tool for Unity Bancorp to invest in growth at high rates of return. When evaluating Unity Bancorp's use of debt, it's crucial to consider it in conjunction with cash and equity.

Continued study

Unity Bancorp (NASDAQ:UNTY), a player in the Banks-Regional industry, is currently trading at $23.11 with a high price of $23.3 and a low of $23. The stock's daily volume stands at 17.8K shares. Analyzing the stock's volatility metrics, the Semi Variance is reported at 2.72, indicating a relatively low level of price volatility. The Downside Deviation of 1.78 further suggests that the stock's price has a limited downside risk. However, the Coefficient Of Variation at 2.1K and the Maximum Drawdown at 9.54 imply a significant potential for price fluctuation, which may be a concern for risk-averse investors. Overall, while Unity Bancorp has demonstrated some potential for growth, investors should consider the stock's volatility before making a decision.
Volatility is a rate at which the price of Unity Bancorp or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of Unity Bancorp may increase or decrease. In other words, similar to Unity's beta indicator, it measures the risk of Unity Bancorp and helps estimate the fluctuations that may happen in a short period of time. So if prices of Unity Bancorp fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility. Please read more on our technical analysis page.

How important is Unity Bancorp's Liquidity

Unity Bancorp financial leverage refers to using borrowed capital as a funding source to finance Unity Bancorp ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Unity Bancorp financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Unity Bancorp's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Unity Bancorp's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Unity Bancorp's total debt and its cash.

How does Unity utilize its cash?

At this time, Unity Bancorp's Net Income is fairly stable compared to the past year. . To perform a cash flow analysis of Unity Bancorp, investors first need to understand how to read the cash flow statement. A cash flow statement shows the amount of cash Unity Bancorp is receiving and how much cash it distributes out in a given period. The Unity Bancorp cash flow statement breaks down these inflows and outflows into different buckets, including operating activities, investing activities, and financing activities.

Unity Bancorp Gross Profit

Unity Bancorp Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Unity Bancorp previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Unity Bancorp Gross Profit growth over the last 10 years. Please check Unity Bancorp's gross profit and other fundamental indicators for more details.

Unity Bancorp Volatility Drivers

Unity Bancorp unsystematic risk is unique to Unity Bancorp and usually not directly affected by the market or economic environment. An example of unsystematic risk is the possibility of poor earnings or a layoff due to coronavirus. One may mitigate nonsystematic risk by buying different securities in the same industry or by buying in different sectors. For example, if you have a position in Unity Bancorp you can also buy HMN Financial. You can also mitigate this risk by investing in the financials sector as well as in companies having nothing to do with it. This type of risk is also called diversifiable risk and can be understood from analyzing Unity Bancorp important indicators over time. Here we run a correlation analysis between relevant fundamental ratios over at least ten year period to find a relationship in the way they react to changes in Unity Bancorp income statement and balance sheet. Here are more details about Unity volatility.
Total Assets
Net Debt
Total Liab
Common Stock
Total Assets
0.561.00.78
Net Debt
0.560.560.72
Total Liab
1.00.560.78
Common Stock
0.780.720.78
Click cells to compare fundamentals

Detailed Perspective On Unity Bancorp

Unity Bancorp reported the previous year's revenue of 97.64 M. Net Income was 38.46 M with profit before overhead, payroll, taxes, and interest of 93.99 M.
 2020 2021 2022 2023 (projected)
Net Income23.64 M36.12 M38.46 M30.52 M
Gross Profit70.38 M88.91 M93.99 M81.97 M
Net IncomeGross Profit
Unity Bancorp (NASDAQ:UNTY), a regional bank, has been making strides in the financial sector with a market capitalization of $232.48M and a current valuation of $495.6M. The company's financial health is reflected in its Price to Earnings ratio of 11.25X and Earnings Per Share of 3.61X. Unity Bancorp's EBITDA stands at $64.82M, demonstrating its profitability. However, the company's growth trajectory is not without risks.
It has a downside deviation of 1.78 and a maximum drawdown of 9.54, indicating potential volatility. The company's risk-adjusted performance is 0.0388, while its market risk-adjusted performance is slightly higher at 0.0759. Unity Bancorp's debt to equity ratio is 12.83%, suggesting a balanced approach to financing its operations. Its operating margin stands at 0.56%, indicating efficient operations. However, the company has a probability of bankruptcy of 46.16%, which investors should consider. In conclusion, while Unity Bancorp appears financially equipped to fuel its growth trajectory, potential investors should be mindful of the associated risks. .

Unity is expecting lower volatility in August

The semi-variance of Unity Bancorp has declined to 2.72, signaling a reduction in the dispersion of the company's returns. This implies a decrease in risk and volatility. This downward trend indicates a more stable and predictable performance for Unity Bancorp in August. Consequently, investors who favor lower-risk stocks may find Unity Bancorp an appealing choice in the upcoming month. Unity Bancorp exhibits relatively low volatility, with a skewness of -0.43 and a kurtosis of 2.31. However, we encourage all investors to independently research Unity Bancorp to ensure that all available information aligns with their expectations regarding its upside potential and future expected returns. Understanding varying market volatility trends often assists investors in timing the market. The appropriate use of volatility indicators allows traders to gauge the risk of Unity Bancorp's stock against market volatility during both bullish and bearish trends. The increased level of volatility that accompanies bear markets can directly affect Unity Bancorp's stock price, causing stress for investors as they witness a decline in the value of their shares. This typically compels investors to rebalance their portfolios by purchasing different stocks as prices drop.

Our Takeaway on Unity Bancorp Investment

While some firms under the banks—regional industry are still a bit expensive, Unity Bancorp may offer a potential longer-term growth to investors. With an optimistic outlook on your 90 days horizon, it may be a good time to buy new shares of Unity or increase your existing holdings in the Stock as it seems the potential growth has not yet been fully factored into the current price. Please use our equity advice module to run different scenarios to ensure your current risk level and investment horizon are fully reflective of your current investing preferences in regards to Unity Bancorp.

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Editorial Staff

Vlad Skutelnik is a Macroaxis Contributor. Vlad covers stocks, funds, cryptocurrencies, and ETFs that are traded in North America, focusing primarily on fundamentals, valuation and market volatility. He has many years of experience in fintech, predictive investment analytics, and risk management. View Profile
This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Vlad Skutelnik do not own shares of Unity Bancorp. Please refer to our Terms of Use for any information regarding our disclosure principles.

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