Analyzing First Merchants (NASDAQ:FRME) & QCR (NASDAQ:QCRH)

First Merchants (NASDAQ:FRME) and QCR (NASDAQ:QCRH) are both finance companies, but which is the better business? We will compare the two businesses based on the strength of their analyst recommendations, profitability, valuation, institutional ownership, earnings, risk and dividends.

Risk and Volatility

First Merchants has a beta of 1.05, indicating that its stock price is 5% more volatile than the S&P 500. Comparatively, QCR has a beta of 0.83, indicating that its stock price is 17% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for First Merchants and QCR, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First Merchants	0	3	3	1	2.71
QCR	0	1	4	0	2.80

First Merchants presently has a consensus price target of $48.00, indicating a potential upside of 27.39%. QCR has a consensus price target of $86.38, indicating a potential upside of 18.83%. Given First Merchants’ higher probable upside, equities analysts clearly believe First Merchants is more favorable than QCR.

Dividends

First Merchants pays an annual dividend of $1.44 per share and has a dividend yield of 3.8%. QCR pays an annual dividend of $0.24 per share and has a dividend yield of 0.3%. First Merchants pays out 37.3% of its earnings in the form of a dividend. QCR pays out 3.6% 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. First Merchants has raised its dividend for 13 consecutive years. First Merchants is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

73.9% of First Merchants shares are held by institutional investors. Comparatively, 70.0% of QCR shares are held by institutional investors. 1.4% of First Merchants shares are held by insiders. Comparatively, 3.7% of QCR shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Valuation and Earnings

This table compares First Merchants and QCR”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First Merchants	$1.07 billion	2.03	$201.40 million	$3.86	9.76
QCR	$597.39 million	2.06	$113.85 million	$6.64	10.95

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

Profitability

This table compares First Merchants and QCR’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First Merchants	21.35%	9.88%	1.23%
QCR	19.43%	11.71%	1.30%

About First Merchants

First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides community banking services. The company offers a range of financial services, including time, savings, and demand deposits; and consumer, commercial, agri-business, public finance, and real estate mortgage loans. It also provides personal and corporate trust; brokerage and private wealth management; and letters of credit, repurchase agreements, and other corporate services. The company operates banking locations in Indiana, Illinois, Ohio, and Michigan counties. It also offers its services through electronic and mobile delivery channels. First Merchants Corporation was founded in 1893 and is headquartered in Muncie, Indiana.

About QCR

QCR Holdings, Inc., a multi-bank holding company, provides commercial and consumer banking, and trust and asset management services. The company’s deposit products include noninterest-bearing demand, interest-bearing demand, time, and brokered deposits. It also provides various commercial and retail lending/leasing, and investment services to corporations, partnerships, individuals, and government agencies. The company’s loan portfolio comprises loans to small and mid-sized businesses; business loans, including lines of credit for working capital and operational purposes; term loans for the acquisition of facilities, equipment, and other purposes; commercial and residential real estate loans; and installment and other consumer loans, such as home improvement, home equity, motor vehicle, and signature loans, as well as small personal credit lines. In addition, it engages in leasing of machinery and equipment to commercial and industrial businesses under direct financing lease contracts; and issuance of trust preferred securities. QCR Holdings, Inc. was incorporated in 1993 and is headquartered in Moline, Illinois.