Critical Analysis: Hingham Institution for Savings (NASDAQ:HIFS) & Merchants Bancorp (NASDAQ:MBIN)

Hingham Institution for Savings (NASDAQ:HIFS) and Merchants Bancorp (NASDAQ:MBIN) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their institutional ownership, profitability, analyst recommendations, dividends, valuation, earnings and risk.

Analyst Ratings

This is a summary of recent ratings for Hingham Institution for Savings and Merchants Bancorp, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hingham Institution for Savings	0	1	0	0	2.00
Merchants Bancorp	1	2	2	0	2.20

Merchants Bancorp has a consensus target price of $40.25, suggesting a potential upside of 13.93%. Given Merchants Bancorp’s stronger consensus rating and higher possible upside, analysts clearly believe Merchants Bancorp is more favorable than Hingham Institution for Savings.

Insider & Institutional Ownership

49.3% of Hingham Institution for Savings shares are held by institutional investors. Comparatively, 24.6% of Merchants Bancorp shares are held by institutional investors. 34.8% of Merchants Bancorp shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Hingham Institution for Savings and Merchants Bancorp”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Hingham Institution for Savings	$236.78 million	2.74	$54.55 million	$24.76	12.03
Merchants Bancorp	$1.45 billion	1.12	$320.39 million	$4.35	8.12

Merchants Bancorp has higher revenue and earnings than Hingham Institution for Savings. Merchants Bancorp is trading at a lower price-to-earnings ratio than Hingham Institution for Savings, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Hingham Institution for Savings has a beta of 1.01, suggesting that its stock price is 1% more volatile than the S&P 500. Comparatively, Merchants Bancorp has a beta of 1.25, suggesting that its stock price is 25% more volatile than the S&P 500.

Dividends

Hingham Institution for Savings pays an annual dividend of $2.52 per share and has a dividend yield of 0.8%. Merchants Bancorp pays an annual dividend of $0.40 per share and has a dividend yield of 1.1%. Hingham Institution for Savings pays out 10.2% of its earnings in the form of a dividend. Merchants Bancorp pays out 9.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Merchants Bancorp has increased its dividend for 8 consecutive years. Merchants Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Hingham Institution for Savings and Merchants Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Hingham Institution for Savings	23.04%	7.16%	0.71%
Merchants Bancorp	17.73%	15.20%	1.30%

Summary

Merchants Bancorp beats Hingham Institution for Savings on 12 of the 17 factors compared between the two stocks.

About Hingham Institution for Savings

Hingham Institution for Savings provides various financial products and services to individuals and small businesses in the United States. It offers savings, checking, money market, demand, and negotiable order of withdrawal accounts, as well as certificates of deposit. The company provides commercial and residential real estate, construction, home equity, commercial, consumer, and mortgage loans. In addition, it offers ATMs, debit cards, and Internet-based banking services. The company offers its services through a network of offices in Boston; Washington, D.C.; and San Francisco Bay Area. Hingham Institution for Savings was incorporated in 1834 and is headquartered in Hingham, Massachusetts.

About Merchants Bancorp

Merchants Bancorp operates as the diversified bank holding company in the United States. It operates through three segments: Multi-family Mortgage Banking, Mortgage Warehousing, and Banking. The Multi-family Mortgage Banking segment engages in the mortgage banking, which originates and services government sponsored mortgages, including bridge financing products to refinance, acquire, or reposition multi-family housing projects, and construction lending for multi-family and healthcare facilities. This segment also offers customized loan products for need-based skilled nursing facilities, such as independent living, assisted living, and memory care; and tax credit equity syndicator service. The Mortgage Warehousing segment funds agency eligible residential loans, as well as commercial loans to non-depository financial institutions. The Banking segment offers a range of financial products and services to consumers and businesses, which includes retail banking, commercial lending, agricultural lending, retail and correspondent residential mortgage banking, and small business administration lending. Merchants Bancorp was founded in 1990 and is headquartered in Carmel, Indiana.