Critical Analysis: Mercantile Bank (NASDAQ:MBWM) & Peoples Bancorp (NASDAQ:PEBO)

Mercantile Bank (NASDAQ:MBWM) and Peoples Bancorp (NASDAQ:PEBO) are both small-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their institutional ownership, earnings, profitability, risk, analyst recommendations, valuation and dividends.

Analyst Recommendations

This is a summary of recent ratings and price targets for Mercantile Bank and Peoples Bancorp, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Mercantile Bank	0	3	2	1	2.67
Peoples Bancorp	0	2	3	1	2.83

Mercantile Bank currently has a consensus price target of $62.20, indicating a potential upside of 1.55%. Peoples Bancorp has a consensus price target of $42.00, indicating a potential upside of 9.20%. Given Peoples Bancorp’s stronger consensus rating and higher possible upside, analysts plainly believe Peoples Bancorp is more favorable than Mercantile Bank.

Insider & Institutional Ownership

58.6% of Mercantile Bank shares are owned by institutional investors. Comparatively, 60.7% of Peoples Bancorp shares are owned by institutional investors. 2.5% of Mercantile Bank shares are owned by company insiders. Comparatively, 3.3% of Peoples Bancorp shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Dividends

Mercantile Bank pays an annual dividend of $1.60 per share and has a dividend yield of 2.6%. Peoples Bancorp pays an annual dividend of $1.68 per share and has a dividend yield of 4.4%. Mercantile Bank pays out 28.5% of its earnings in the form of a dividend. Peoples Bancorp pays out 49.6% 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 raised its dividend for 14 consecutive years and Peoples Bancorp has raised its dividend for 10 consecutive years.

Risk and Volatility

Mercantile Bank has a beta of 0.82, suggesting that its stock price is 18% less volatile than the S&P 500. Comparatively, Peoples Bancorp has a beta of 0.63, suggesting that its stock price is 37% less volatile than the S&P 500.

Profitability

This table compares Mercantile Bank and Peoples Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Mercantile Bank	24.42%	13.37%	1.43%
Peoples Bancorp	19.76%	11.08%	1.41%

Earnings & Valuation

This table compares Mercantile Bank and Peoples Bancorp”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Mercantile Bank	$371.80 million	2.85	$88.75 million	$5.61	10.92
Peoples Bancorp	$618.38 million	2.24	$106.78 million	$3.39	11.35

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

Summary

Peoples Bancorp beats Mercantile Bank on 9 of the 17 factors compared between the two stocks.

About Mercantile Bank

Mercantile Bank Corporation is a Michigan-based bank holding company headquartered in Grand Rapids. Through its subsidiary, Mercantile Bank, it provides commercial and personal banking services to individuals, businesses and organizations across Michigan. The bank offers deposit accounts and lending products, including commercial, real estate, mortgage and consumer loans. Its services also include online and mobile banking and other banking solutions for businesses and individuals. Mercantile Bank traces its history to 1997, when it began operations in West Michigan.

About Peoples Bancorp

Peoples Bancorp Inc. is a financial holding company headquartered in Marietta, Ohio. Its principal subsidiary, Peoples Bank, provides commercial and consumer banking services to individuals, businesses and local organizations. The company offers deposit accounts, loans, payment services and other banking products, along with services such as wealth management, insurance and equipment financing. Its branches and service areas extend across Ohio, West Virginia, Kentucky and Virginia. Peoples traces its history to 1902, when it was established in Marietta.