First Merchants (NASDAQ:FRME) and Eagle Bancorp Montana (NASDAQ:EBMT) Critical Contrast

First Merchants (NASDAQ:FRME) and Eagle Bancorp Montana (NASDAQ:EBMT) are both finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their dividends, analyst recommendations, profitability, earnings, risk, institutional ownership and valuation.

Insider & Institutional Ownership

73.9% of First Merchants shares are owned by institutional investors. Comparatively, 35.7% of Eagle Bancorp Montana shares are owned by institutional investors. 1.4% of First Merchants shares are owned by company insiders. Comparatively, 6.1% of Eagle Bancorp Montana shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of recent ratings and recommmendations for First Merchants and Eagle Bancorp Montana, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First Merchants	0	4	3	0	2.43
Eagle Bancorp Montana	0	1	1	0	2.50

First Merchants presently has a consensus price target of $47.60, indicating a potential upside of 26.93%. Given First Merchants’ higher possible upside, analysts clearly believe First Merchants is more favorable than Eagle Bancorp Montana.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
First Merchants	22.04%	9.82%	1.23%
Eagle Bancorp Montana	10.76%	7.53%	0.64%

Valuation & Earnings

This table compares First Merchants and Eagle Bancorp Montana”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First Merchants	$647.91 million	3.35	$201.40 million	$4.00	9.38
Eagle Bancorp Montana	$121.99 million	1.28	$9.78 million	$1.72	11.38

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

Dividends

First Merchants pays an annual dividend of $1.44 per share and has a dividend yield of 3.8%. Eagle Bancorp Montana pays an annual dividend of $0.58 per share and has a dividend yield of 3.0%. First Merchants pays out 36.0% of its earnings in the form of a dividend. Eagle Bancorp Montana pays out 33.7% 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 increased its dividend for 13 consecutive years and Eagle Bancorp Montana has increased its dividend for 14 consecutive years.

Volatility & Risk

First Merchants has a beta of 0.93, suggesting that its stock price is 7% less volatile than the S&P 500. Comparatively, Eagle Bancorp Montana has a beta of 0.31, suggesting that its stock price is 69% less volatile than the S&P 500.

Summary

First Merchants beats Eagle Bancorp Montana on 12 of the 17 factors compared between the two stocks.

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 Eagle Bancorp Montana

Eagle Bancorp Montana, Inc. operates as the bank holding company for Opportunity Bank of Montana that provides various retail banking products and services to small businesses and individuals in Montana. It accepts various deposit products, such as checking, savings, money market, and individual retirement accounts, as well as certificates of deposit accounts. The company also provides 1-4 family residential mortgage loans, such as residential mortgages and construction of residential properties; commercial real estate loans, including multi-family dwellings, nonresidential property, commercial construction and development, and farmland loans; and second mortgage/home equity loans. In addition, it offers consumer loans, such as loans secured by collateral other than real estate, such as automobiles, recreational vehicles, and boats; personal loans and lines of credit; commercial business loans consisting of business loans and lines of credit on a secured and unsecured basis; construction loans; agricultural loans; and mortgage loan services. The company operates full-service branches and automated teller machines. Eagle Bancorp Montana, Inc. was founded in 1922 and is headquartered in Helena, Montana.