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

Dividends

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

Insider & Institutional Ownership

46.6% of MidWestOne Financial Group shares are held by institutional investors. Comparatively, 54.6% of Mercantile Bank Corporation shares are held by institutional investors. 25.3% of MidWestOne Financial Group shares are held by insiders. Comparatively, 3.2% of Mercantile Bank Corporation 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.

Earnings and Valuation

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

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
MidWestOne Financial Group $135.76 million 3.07 $20.39 million $2.03 16.78
Mercantile Bank Corporation $139.49 million 4.07 $31.91 million $1.91 18.02

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.

Risk and Volatility

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

Analyst Ratings

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

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

MidWestOne Financial Group presently has a consensus target price of $38.50, suggesting a potential upside of 13.04%. Mercantile Bank Corporation has a consensus target price of $33.67, suggesting a potential downside of 2.19%. Given MidWestOne Financial Group’s stronger consensus rating and higher probable upside, research analysts plainly believe MidWestOne Financial Group is more favorable than Mercantile Bank Corporation.

Profitability

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

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

Summary

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

MidWestOne Financial Group Company Profile

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.

Mercantile Bank Corporation Company Profile

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.

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