Analyzing Enterprise Financial Services (NASDAQ:EFSC) and Mercantile Bank (NASDAQ:MBWM)

Enterprise Financial Services (NASDAQ:EFSC) and Mercantile Bank (NASDAQ:MBWM) are both finance companies, but which is the better business? We will compare the two companies based on the strength of their analyst recommendations, institutional ownership, valuation, earnings, risk, dividends and profitability.

Dividends

Enterprise Financial Services pays an annual dividend of $1.24 per share and has a dividend yield of 2.2%. Mercantile Bank pays an annual dividend of $1.52 per share and has a dividend yield of 3.3%. Enterprise Financial Services pays out 23.5% of its earnings in the form of a dividend. Mercantile Bank pays out 28.8% 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. Enterprise Financial Services has increased its dividend for 11 consecutive years and Mercantile Bank has increased its dividend for 14 consecutive years. Mercantile Bank is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Enterprise Financial Services and Mercantile Bank, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Enterprise Financial Services	0	1	3	0	2.75
Mercantile Bank	0	2	4	0	2.67

Enterprise Financial Services presently has a consensus price target of $65.00, suggesting a potential upside of 17.39%. Mercantile Bank has a consensus price target of $54.50, suggesting a potential upside of 19.62%. Given Mercantile Bank’s higher probable upside, analysts plainly believe Mercantile Bank is more favorable than Enterprise Financial Services.

Volatility and Risk

Enterprise Financial Services has a beta of 0.88, indicating that its share price is 12% less volatile than the S&P 500. Comparatively, Mercantile Bank has a beta of 0.87, indicating that its share price is 13% less volatile than the S&P 500.

Earnings & Valuation

This table compares Enterprise Financial Services and Mercantile Bank”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Enterprise Financial Services	$920.75 million	2.22	$185.27 million	$5.27	10.51
Mercantile Bank	$361.89 million	2.05	$79.59 million	$5.28	8.63

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

Institutional & Insider Ownership

72.2% of Enterprise Financial Services shares are owned by institutional investors. Comparatively, 58.6% of Mercantile Bank shares are owned by institutional investors. 2.3% of Enterprise Financial Services shares are owned by insiders. Comparatively, 3.2% of Mercantile Bank shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Enterprise Financial Services and Mercantile Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Enterprise Financial Services	21.28%	11.19%	1.29%
Mercantile Bank	23.05%	14.07%	1.40%

Summary

Mercantile Bank beats Enterprise Financial Services on 9 of the 17 factors compared between the two stocks.

About Enterprise Financial Services

Enterprise Financial Services Corp operates as the holding company for Enterprise Bank & Trust that offers banking and wealth management services to individuals and corporate customers primarily in Arizona, California, Florida, Kansas, Missouri, Nevada, and New Mexico. It provides checking, savings, money market accounts, and certificates of deposit. The company also provides commercial and industrial, commercial real estate, real estate construction and development, residential real estate, small business administration, agricultural, consumer, and other loan products. In addition, it offers treasury management and international trade services; tax credit brokerage services; life insurance premium and sponsor finance; tax credit related lending; other deposit accounts, such as community associations, property management, third party escrow, and trust services; treasury management product and services; customized solutions and products; cash management; fiduciary, investment management, and financial advisory services; and customer hedging products, including international banking, card services, and tax credit businesses. Further, the company provides online, device applications, text, and voice banking; remote deposit capture; internet banking, mobile banking, cash management, positive pay services, fraud detection and prevention, automated payables, check image, and statement and document imaging; and controlled disbursements, repurchase agreements, and sweep investment accounts. Enterprise Financial Services Corp was founded in 1988 and is headquartered in Clayton, Missouri.

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.