Macatawa Bank (NASDAQ: MCBC) and Independent Bank (NASDAQ:INDB) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, risk, analyst recommendations, profitability, valuation, dividends and institutional ownership.

Earnings and Valuation

This table compares Macatawa Bank and Independent Bank’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Macatawa Bank $71.57 million 4.78 $15.95 million $0.53 19.04
Independent Bank $329.07 million 5.96 $76.64 million $3.02 23.68

Independent Bank has higher revenue and earnings than Macatawa Bank. Macatawa Bank is trading at a lower price-to-earnings ratio than Independent Bank, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

28.7% of Macatawa Bank shares are owned by institutional investors. Comparatively, 79.8% of Independent Bank shares are owned by institutional investors. 8.7% of Macatawa Bank shares are owned by company insiders. Comparatively, 2.7% of Independent Bank shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent ratings for Macatawa Bank and Independent Bank, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Macatawa Bank 0 1 0 0 2.00
Independent Bank 0 4 0 0 2.00

Macatawa Bank currently has a consensus price target of $10.00, suggesting a potential downside of 0.89%. Independent Bank has a consensus price target of $70.67, suggesting a potential downside of 1.17%. Given Macatawa Bank’s higher probable upside, analysts clearly believe Macatawa Bank is more favorable than Independent Bank.

Risk & Volatility

Macatawa Bank has a beta of 1.12, meaning that its stock price is 12% more volatile than the S&P 500. Comparatively, Independent Bank has a beta of 0.97, meaning that its stock price is 3% less volatile than the S&P 500.

Dividends

Macatawa Bank pays an annual dividend of $0.20 per share and has a dividend yield of 2.0%. Independent Bank pays an annual dividend of $1.28 per share and has a dividend yield of 1.8%. Macatawa Bank pays out 37.7% of its earnings in the form of a dividend. Independent Bank pays out 42.4% 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. Macatawa Bank is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Macatawa Bank and Independent Bank’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Macatawa Bank 24.64% 10.84% 1.03%
Independent Bank 23.48% 9.76% 1.11%

About Macatawa Bank

Macatawa Bank Corporation is a bank holding company. The Company, through its subsidiary, Macatawa Bank (the Bank), offers a range of commercial and personal banking services, including checking, savings and certificates of deposit accounts, cash management, safe deposit boxes, trust services and commercial, mortgage and consumer loans. The Bank is a Michigan chartered bank with depository accounts insured by the Federal Deposit Insurance Corporation. Its other services include automated teller machines (ATMs), Internet banking, telephone banking and debit cards. The Bank provides various brokerage services, including discount brokerage through Infinex, personal financial planning and consultation regarding mutual funds. As of December 31, 2016, the Bank operated 26 full service branch offices providing a range of commercial and consumer banking and trust services in Kent County, Ottawa County, and northern Allegan County, Michigan.

About Independent Bank

Independent Bank Corp. is a bank holding company. The Company operates through its subsidiary, Rockland Trust Company (the Bank). The Bank is a community-oriented commercial bank. Its community banking business provides a range of banking services, including lending activities, acceptance of demand, savings, and time deposits, and investment management. As of December 31, 2016, the bank had operated 80 full service and three limited service retail branches, 11 commercial banking centers, five investment management offices and one mortgage lending center, all of which located in Eastern Massachusetts. The Bank classifies loans as commercial loans, consumer real estate loans, or other consumer loans. Commercial loans consist of commercial and industrial loans, commercial real estate loans, commercial construction loans, and small business loans. The Bank offers a range of demand deposits, interest checking, money market accounts, savings accounts and time certificates of deposit.

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