Comparing Farmers & Merchants Bancorp (NASDAQ:FMAO) and ConnectOne Bancorp (NASDAQ:CNOB)

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

Institutional & Insider Ownership

67.7% of ConnectOne Bancorp shares are owned by institutional investors. Comparatively, 24.0% of Farmers & Merchants Bancorp shares are owned by institutional investors. 6.4% of ConnectOne Bancorp shares are owned by insiders. Comparatively, 7.3% of Farmers & Merchants Bancorp shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and recommmendations for ConnectOne Bancorp and Farmers & Merchants Bancorp, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ConnectOne Bancorp	0	1	3	0	2.75
Farmers & Merchants Bancorp	0	2	0	0	2.00

ConnectOne Bancorp presently has a consensus price target of $30.67, indicating a potential upside of 19.60%. Given ConnectOne Bancorp’s stronger consensus rating and higher probable upside, research analysts clearly believe ConnectOne Bancorp is more favorable than Farmers & Merchants Bancorp.

Earnings and Valuation

This table compares ConnectOne Bancorp and Farmers & Merchants Bancorp”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ConnectOne Bancorp	$679.93 million	1.90	$80.44 million	$1.50	17.09
Farmers & Merchants Bancorp	$190.68 million	1.93	$33.31 million	$2.42	10.47

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
ConnectOne Bancorp	11.83%	9.33%	0.98%
Farmers & Merchants Bancorp	17.47%	9.33%	0.98%

Dividends

ConnectOne Bancorp pays an annual dividend of $0.72 per share and has a dividend yield of 2.8%. Farmers & Merchants Bancorp pays an annual dividend of $0.92 per share and has a dividend yield of 3.6%. ConnectOne Bancorp pays out 48.0% of its earnings in the form of a dividend. Farmers & Merchants Bancorp pays out 38.0% 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. ConnectOne Bancorp has increased its dividend for 4 consecutive years and Farmers & Merchants Bancorp has increased its dividend for 19 consecutive years. Farmers & Merchants Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

ConnectOne Bancorp has a beta of 1.13, indicating that its stock price is 13% more volatile than the S&P 500. Comparatively, Farmers & Merchants Bancorp has a beta of 0.85, indicating that its stock price is 15% less volatile than the S&P 500.

Summary

ConnectOne Bancorp beats Farmers & Merchants Bancorp on 8 of the 15 factors compared between the two stocks.

About ConnectOne Bancorp

ConnectOne Bancorp, Inc. operates as the bank holding company for ConnectOne Bank that provides commercial banking products and services for small and mid-sized businesses, local professionals, and individuals in the New York Metropolitan area and South Florida market. The company offers personal and business checking, money market, and time and savings accounts; credit cards, wire transfers, safe deposit boxes, automated teller services and telephone, and internet and mobile banking. It provides retirement accounts, consumers and cash management services for business clients, including treasury direct, automated clearing house, remote deposit capture, and digital invoicing. In addition, the company offers consumer and commercial business loans, including lines of credit, commercial and residential mortgages, home equity and bridge loans, and other personal loans; commercial loans secured by collateral, such as business assets comprising accounts receivable, inventory and equipment, and mortgages filed on commercial and residential real estate, as well as cash balances and marketable securities. Further, it provides real estate loans, which includes loans secured by first liens on completed commercial properties, including multi-family properties, to purchase or refinance properties; residential mortgages, such as loans secured by first liens on 1-4 family and condominium; and cooperative residential real estate loans. The company was formerly known as Center Bancorp, Inc. and changed its name to ConnectOne Bancorp, Inc. in July 2014. ConnectOne Bancorp, Inc. was incorporated in 1982 and is headquartered in Englewood Cliffs, New Jersey.

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.