Capitol Federal Financial (NASDAQ:CFFN – Get Free Report) and Mercantile Bank (NASDAQ:MBWM – 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 profitability, valuation, dividends, earnings, analyst recommendations, institutional ownership and risk.
Profitability
This table compares Capitol Federal Financial and Mercantile Bank’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Capitol Federal Financial | 18.69% | 8.01% | 0.85% |
| Mercantile Bank | 24.75% | 13.66% | 1.46% |
Insider and Institutional Ownership
88.5% of Capitol Federal Financial shares are owned by institutional investors. Comparatively, 58.6% of Mercantile Bank shares are owned by institutional investors. 2.8% of Capitol Federal Financial shares are owned by company insiders. Comparatively, 2.5% of Mercantile Bank shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.
Valuation and Earnings
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Capitol Federal Financial | $420.24 million | 2.57 | $68.03 million | $0.65 | 13.20 |
| Mercantile Bank | $260.81 million | 3.94 | $88.75 million | $5.68 | 10.48 |
Mercantile Bank has lower revenue, but higher earnings 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.
Volatility & Risk
Capitol Federal Financial has a beta of 0.7, indicating that its stock price is 30% less volatile than the S&P 500. Comparatively, Mercantile Bank has a beta of 0.83, indicating that its stock price is 17% less volatile than the S&P 500.
Dividends
Capitol Federal Financial pays an annual dividend of $0.34 per share and has a dividend yield of 4.0%. Mercantile Bank pays an annual dividend of $1.60 per share and has a dividend yield of 2.7%. Capitol Federal Financial pays out 52.3% of its earnings in the form of a dividend. Mercantile Bank pays out 28.2% 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. Mercantile Bank has increased its dividend for 14 consecutive years.
Analyst Recommendations
This is a breakdown of current recommendations for Capitol Federal Financial and Mercantile Bank, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Capitol Federal Financial | 0 | 3 | 1 | 1 | 2.60 |
| Mercantile Bank | 0 | 3 | 3 | 0 | 2.50 |
Capitol Federal Financial currently has a consensus price target of $9.25, suggesting a potential upside of 7.81%. Mercantile Bank has a consensus price target of $62.00, suggesting a potential upside of 4.20%. Given Capitol Federal Financial’s stronger consensus rating and higher probable upside, research analysts clearly believe Capitol Federal Financial is more favorable than Mercantile Bank.
Summary
Mercantile Bank beats Capitol Federal Financial on 10 of the 18 factors compared between the two stocks.
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.
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.
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