Mercantile Bank Corporation (NASDAQ: MBWM) and MidWestOne Financial Group (NASDAQ:MOFG) are both small-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their institutional ownership, dividends, analyst recommendations, valuation, risk, earnings and profitability.

Volatility and Risk

Mercantile Bank Corporation has a beta of 0.7, meaning that its share price is 30% less volatile than the S&P 500. Comparatively, MidWestOne Financial Group has a beta of 1.23, meaning that its share price is 23% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and recommmendations for Mercantile Bank Corporation and MidWestOne Financial Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Mercantile Bank Corporation 0 4 0 0 2.00
MidWestOne Financial Group 0 1 1 0 2.50

Mercantile Bank Corporation presently has a consensus target price of $33.67, indicating a potential downside of 2.87%. MidWestOne Financial Group has a consensus target price of $38.50, indicating a potential upside of 12.64%. Given MidWestOne Financial Group’s stronger consensus rating and higher possible upside, analysts clearly believe MidWestOne Financial Group is more favorable than Mercantile Bank Corporation.

Earnings and Valuation

This table compares Mercantile Bank Corporation and MidWestOne Financial Group’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Mercantile Bank Corporation $139.49 million 4.10 $31.91 million $1.91 18.15
MidWestOne Financial Group $135.76 million 3.08 $20.39 million $2.03 16.84

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

Dividends

Mercantile Bank Corporation pays an annual dividend of $0.76 per share and has a dividend yield of 2.2%. MidWestOne Financial Group pays an annual dividend of $0.68 per share and has a dividend yield of 2.0%. Mercantile Bank Corporation pays out 39.8% of its earnings in the form of a dividend. MidWestOne Financial Group pays out 33.5% 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.

Institutional and Insider Ownership

54.6% of Mercantile Bank Corporation shares are owned by institutional investors. Comparatively, 46.6% of MidWestOne Financial Group shares are owned by institutional investors. 3.2% of Mercantile Bank Corporation shares are owned by company insiders. Comparatively, 25.3% of MidWestOne Financial Group shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Mercantile Bank Corporation and MidWestOne Financial Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Mercantile Bank Corporation 22.18% 8.91% 1.00%
MidWestOne Financial Group 17.35% 7.38% 0.79%

Summary

Mercantile Bank Corporation beats MidWestOne Financial Group on 9 of the 16 factors compared between the two stocks.

About Mercantile Bank Corporation

Mercantile Bank Corporation is a bank holding company. The Company owns the Mercantile Bank of Michigan (the Bank). The Bank is a state banking company. The Bank provides commercial banking services primarily to small- to medium-sized businesses and retail banking services. The Bank makes secured and unsecured commercial, construction, mortgage and consumer loans, and accepts checking, savings and time deposits. The Bank also enables customers to conduct certain loan and deposit transactions by personal computer and through mobile applications. Courier service is provided to certain commercial customers, and safe deposit facilities are available at its office locations. The Bank’s commercial lending group originates commercial loans and leases primarily in its market areas. The Bank’s primary deposit products are checking, savings and term certificate accounts.

About MidWestOne Financial Group

MidWestOne Financial Group, Inc. is a bank holding and financial holding company. The Company operates through its bank subsidiaries, MidWestOne Bank, Central Bank and MidWestOne Insurance Services, Inc. that operates through three agencies located in central and east-central Iowa. As of December 31, 2016, the Bank operated a total of 43 banking offices in Iowa, Minnesota, Wisconsin, and Florida. It provides full service retail banking in the communities in which its branch offices are located and also offers trust and investment management services. The Bank offers deposit products, including checking and other demand deposit accounts, negotiable order of withdrawal (NOW) accounts, savings accounts, money market accounts, certificates of deposit, individual retirement accounts and other time deposits. The Bank offers commercial and industrial, agricultural, real estate mortgage and consumer loans.

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