Mercantile Bank (NASDAQ:MBWM) & Capitol Federal Financial (NASDAQ:CFFN) Financial Review

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

Dividends

Mercantile Bank pays an annual dividend of $1.60 per share and has a dividend yield of 2.7%. Capitol Federal Financial pays an annual dividend of $0.34 per share and has a dividend yield of 3.9%. Mercantile Bank pays out 28.2% of its earnings in the form of a dividend. Capitol Federal Financial pays out 52.3% 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. Mercantile Bank has increased its dividend for 14 consecutive years.

Earnings and Valuation

This table compares Mercantile Bank and Capitol Federal Financial”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Mercantile Bank	$371.80 million	2.79	$88.75 million	$5.68	10.57
Capitol Federal Financial	$420.24 million	2.60	$68.03 million	$0.65	13.35

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

Analyst Recommendations

This is a summary of recent recommendations for Mercantile Bank and Capitol Federal Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Mercantile Bank	0	3	3	0	2.50
Capitol Federal Financial	0	3	1	1	2.60

Mercantile Bank presently has a consensus target price of $62.00, indicating a potential upside of 3.28%. Capitol Federal Financial has a consensus target price of $9.25, indicating a potential upside of 6.57%. Given Capitol Federal Financial’s stronger consensus rating and higher possible upside, analysts clearly believe Capitol Federal Financial is more favorable than Mercantile Bank.

Risk & Volatility

Mercantile Bank has a beta of 0.8, indicating that its share price is 20% less volatile than the S&P 500. Comparatively, Capitol Federal Financial has a beta of 0.68, indicating that its share price is 32% less volatile than the S&P 500.

Profitability

This table compares Mercantile Bank and Capitol Federal Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Mercantile Bank	24.75%	13.66%	1.46%
Capitol Federal Financial	18.69%	8.01%	0.85%

Insider & Institutional Ownership

58.6% of Mercantile Bank shares are held by institutional investors. Comparatively, 88.5% of Capitol Federal Financial shares are held by institutional investors. 2.5% of Mercantile Bank shares are held by insiders. Comparatively, 2.8% of Capitol Federal Financial 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.

Summary

Mercantile Bank beats Capitol Federal Financial on 10 of the 18 factors compared between the two stocks.

About Mercantile Bank

Mercantile Bank Corporation operates as the bank holding company for Mercantile Bank of Michigan that provides commercial and retail banking services to small- to medium-sized businesses and individuals in the United States. It accepts various deposit products, including checking, savings, and term certificate accounts; time deposits; and certificates of deposit. The company also provides commercial and industrial loans; vacant land, land development, and residential construction loans; owner and non-owner occupied real estate loans; multi-family and residential rental property loans; single-family residential real estate loans; home equity line of credit programs; and consumer loans, such as new and used automobile and boat loans, and credit cards, as well as overdraft protection services; and residential mortgage and instalment loans. In addition, it offers courier services and safe deposit facilities; and insurance products, such as private passenger automobile, homeowners, personal inland marine, boat owners, recreational vehicle, dwelling fire, umbrella policies, small business, and life insurance products. The company was incorporated in 1997 and is headquartered in Grand Rapids, Michigan.

About Capitol Federal Financial

Capitol Federal Financial, Inc. operates as the holding company for Capitol Federal Savings Bank that provides various retail banking products and services in the United States. The company accepts a range of deposit products, including savings accounts, money market accounts, interest-bearing and non-interest-bearing checking accounts, and certificates of deposit. It also provides various loan products, such as one- to four-family residential real estate loans, commercial real estate, commercial and industrial, construction loans, and small business loans, as well as consumer loans, which include home equity loans and lines of credit, home improvement loans, vehicle loans, and loans secured by savings deposits. In addition, the company offers mobile, telephone, and online banking services, as well as bill payment services; credit cards; mortgage loan; operates a call center; and invests in various securities. The company serves the metropolitan areas of Topeka, Wichita, Lawrence, Manhattan, Emporia, and Salina, Kansas, and a portion of the metropolitan area of greater Kansas City. Capitol Federal Financial, Inc. was founded in 1893 and is headquartered in Topeka, Kansas.