Contrasting Farmers & Merchants Bancorp (NASDAQ:FMAO) and Colony Bankcorp (NYSE:CBAN)

Farmers & Merchants Bancorp (NASDAQ:FMAO) and Colony Bankcorp (NYSE:CBAN) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their valuation, risk, earnings, institutional ownership, analyst recommendations, profitability and dividends.

Institutional and Insider Ownership

24.0% of Farmers & Merchants Bancorp shares are held by institutional investors. Comparatively, 50.4% of Colony Bankcorp shares are held by institutional investors. 7.3% of Farmers & Merchants Bancorp shares are held by insiders. Comparatively, 3.9% of Colony Bankcorp shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of current recommendations and price targets for Farmers & Merchants Bancorp and Colony Bankcorp, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Farmers & Merchants Bancorp	0	3	0	1	2.50
Colony Bankcorp	0	1	3	0	2.75

Farmers & Merchants Bancorp currently has a consensus target price of $33.75, suggesting a potential downside of 7.15%. Colony Bankcorp has a consensus target price of $23.00, suggesting a potential upside of 13.57%. Given Colony Bankcorp’s stronger consensus rating and higher probable upside, analysts plainly believe Colony Bankcorp is more favorable than Farmers & Merchants Bancorp.

Dividends

Farmers & Merchants Bancorp pays an annual dividend of $0.96 per share and has a dividend yield of 2.6%. Colony Bankcorp pays an annual dividend of $0.48 per share and has a dividend yield of 2.4%. Farmers & Merchants Bancorp pays out 30.9% of its earnings in the form of a dividend. Colony Bankcorp pays out 26.4% 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. Farmers & Merchants Bancorp has increased its dividend for 19 consecutive years and Colony Bankcorp has increased its dividend for 7 consecutive years. Farmers & Merchants Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

Farmers & Merchants Bancorp has a beta of 0.76, suggesting that its stock price is 24% less volatile than the S&P 500. Comparatively, Colony Bankcorp has a beta of 0.57, suggesting that its stock price is 43% less volatile than the S&P 500.

Valuation & Earnings

This table compares Farmers & Merchants Bancorp and Colony Bankcorp”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Farmers & Merchants Bancorp	$190.68 million	2.62	$33.31 million	$3.11	11.69
Colony Bankcorp	$190.23 million	2.26	$28.25 million	$1.82	11.13

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

Profitability

This table compares Farmers & Merchants Bancorp and Colony Bankcorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Farmers & Merchants Bancorp	21.30%	11.25%	1.22%
Colony Bankcorp	16.71%	10.73%	1.11%

Summary

Farmers & Merchants Bancorp beats Colony Bankcorp on 13 of the 18 factors compared between the two stocks.

About Farmers & Merchants Bancorp

Farmers & Merchants Bancorp, Inc. is a bank holding company, which engages in the provision of commercial banking, retail banking, and financial services. It includes commercial, agricultural, and residential mortgages as well as consumer and credit card lending activities. The firm also offers checking account services, and savings and time deposit services. The company was founded in 1985 and is headquartered in Archbold, OH.

About Colony Bankcorp

Colony Bankcorp, Inc. operates as the bank holding company for Colony Bank that provides various banking products and services to commercial and consumer customers. The company offers various deposit products, including demand, savings, and time deposits. It also provides loans to small and medium-sized businesses; residential and commercial construction, and land development loans; commercial real estate loans; commercial loans; agri-business and production loans; residential mortgage loans; home equity loans; and consumer loans. In addition, the company offers internet banking services, electronic bill payment services, safe deposit box rentals, telephone banking, credit and debit card services, and remote depository products, as well as access to a network of ATMs. As of January 20, 2022, it operated 39 locations throughout Georgia. The company was founded in 1975 and is headquartered in Fitzgerald, Georgia.