MainStreet Bank (NASDAQ:MNSB – Get Free Report) and Farmers & Merchants Bancorp (NASDAQ:FMAO – Get Free Report) are both small-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their institutional ownership, profitability, analyst recommendations, valuation, earnings, risk and dividends.
Dividends
MainStreet Bank pays an annual dividend of $0.40 per share and has a dividend yield of 1.7%. Farmers & Merchants Bancorp pays an annual dividend of $0.92 per share and has a dividend yield of 3.3%. MainStreet Bank pays out 20.1% of its earnings in the form of a dividend. Farmers & Merchants Bancorp pays out 35.2% 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. Farmers & Merchants Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Risk and Volatility
MainStreet Bank has a beta of 0.55, indicating that its share price is 45% less volatile than the S&P 500. Comparatively, Farmers & Merchants Bancorp has a beta of 0.82, indicating that its share price is 18% less volatile than the S&P 500.
Analyst Recommendations
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| MainStreet Bank | 0 | 1 | 1 | 0 | 2.50 |
| Farmers & Merchants Bancorp | 0 | 3 | 1 | 0 | 2.25 |
Farmers & Merchants Bancorp has a consensus price target of $28.50, indicating a potential upside of 1.60%. Given Farmers & Merchants Bancorp’s higher possible upside, analysts clearly believe Farmers & Merchants Bancorp is more favorable than MainStreet Bank.
Earnings & Valuation
This table compares MainStreet Bank and Farmers & Merchants Bancorp”s gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| MainStreet Bank | $135.62 million | 1.22 | $15.61 million | $1.99 | 11.67 |
| Farmers & Merchants Bancorp | $190.68 million | 2.03 | $33.31 million | $2.61 | 10.75 |
Farmers & Merchants Bancorp has higher revenue and earnings than MainStreet Bank. Farmers & Merchants Bancorp is trading at a lower price-to-earnings ratio than MainStreet Bank, indicating that it is currently the more affordable of the two stocks.
Institutional & Insider Ownership
52.3% of MainStreet Bank shares are owned by institutional investors. Comparatively, 24.0% of Farmers & Merchants Bancorp shares are owned by institutional investors. 10.2% of MainStreet Bank shares are owned by company insiders. Comparatively, 7.3% of Farmers & Merchants Bancorp shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.
Profitability
This table compares MainStreet Bank and Farmers & Merchants Bancorp’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| MainStreet Bank | 12.94% | 9.13% | 0.80% |
| Farmers & Merchants Bancorp | 18.54% | 9.85% | 1.05% |
Summary
Farmers & Merchants Bancorp beats MainStreet Bank on 11 of the 16 factors compared between the two stocks.
About MainStreet Bank
MainStreet Bancshares, Inc. operates as the bank holding company for MainStreet Bank that provides various banking products and services for individuals, small to medium-sized businesses, and professional service organizations. The company offers demand, NOW, money market, savings, and sweep accounts, as well as certificates of deposit; business and consumer checking, interest-bearing checking, business account analysis, and other depository services; and cash management, wire transfer, check imaging, bill pay, remote deposit capture, and courier services. It also provides commercial loans, include government contract receivables, plant and equipment, general working capital, contract administration, and acquisition loans; commercial real estate, real estate construction, and residential real estate loans; and consumer loans comprising term loans and overdraft protection, as well as debit and credit cards. In addition, the company offers deposit insurance solutions; remote deposit of checks; and internet bill payment, online cash management, and online and mobile banking services. It operates in Herndon, Fairfax, McLean, Leesburg, Clarendon, and Washington D.C., as well as automated teller machines. The company was incorporated in 2003 and is headquartered in Fairfax, Virginia.
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.
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