Comparing First Commonwealth Financial (NYSE:FCF) and F & M Bank (OTCMKTS:FMBM)

F & M Bank (OTCMKTS:FMBM) and First Commonwealth Financial (NYSE:FCF) are both small-cap finance companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, earnings, dividends, profitability, analyst recommendations, valuation and risk.

Institutional and Insider Ownership

3.9% of F & M Bank shares are held by institutional investors. Comparatively, 72.6% of First Commonwealth Financial shares are held by institutional investors. 11.6% of F & M Bank shares are held by company insiders. Comparatively, 2.2% of First Commonwealth Financial shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Profitability

This table compares F & M Bank and First Commonwealth Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
F & M Bank	14.23%	11.72%	0.85%
First Commonwealth Financial	20.88%	10.43%	1.30%

Volatility and Risk

F & M Bank has a beta of 0.29, suggesting that its stock price is 71% less volatile than the S&P 500. Comparatively, First Commonwealth Financial has a beta of 0.81, suggesting that its stock price is 19% less volatile than the S&P 500.

Analyst Ratings

This is a summary of current recommendations for F & M Bank and First Commonwealth Financial, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
F & M Bank	0	0	0	0	0.00
First Commonwealth Financial	0	3	4	0	2.57

First Commonwealth Financial has a consensus target price of $19.75, suggesting a potential upside of 12.76%. Given First Commonwealth Financial’s stronger consensus rating and higher possible upside, analysts plainly believe First Commonwealth Financial is more favorable than F & M Bank.

Dividends

F & M Bank pays an annual dividend of $1.04 per share and has a dividend yield of 3.3%. First Commonwealth Financial pays an annual dividend of $0.54 per share and has a dividend yield of 3.1%. F & M Bank pays out 32.8% of its earnings in the form of a dividend. First Commonwealth Financial pays out 37.0% 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. First Commonwealth Financial has increased its dividend for 9 consecutive years. F & M Bank is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation & Earnings

This table compares F & M Bank and First Commonwealth Financial”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
F & M Bank	$78.92 million	1.43	$11.23 million	$3.17	9.97
First Commonwealth Financial	$729.51 million	2.49	$152.30 million	$1.46	12.00

First Commonwealth Financial has higher revenue and earnings than F & M Bank. F & M Bank is trading at a lower price-to-earnings ratio than First Commonwealth Financial, indicating that it is currently the more affordable of the two stocks.

Summary

First Commonwealth Financial beats F & M Bank on 12 of the 17 factors compared between the two stocks.

About F & M Bank

F & M Bank Corp. operates as the bank holding company for Farmers & Merchants Bank that provides financial products and services to consumers and businesses in Virginia. The company offers commercial and individual demand and time deposit accounts, savings accounts, money market accounts, internet and mobile banking services, and drive-in banking services. It also provides construction loans, including residential, and land acquisition and development loans; commercial real estate loans; business loans; consumer loans, such as personal loans, automobile loans, deposit account loans, installment and demand loans, and home equity loans; residential mortgage loans; credit cards; dealer finance; farmland loans; multi-family loans; and commercial and industrial loans. In addition, the company offers brokerage services and commercial and personal insurance products. Further, it originates conventional and government agency sponsored mortgages; and offers title insurance and real estate settlement services. The company was founded in 1908 and is headquartered in Timberville, Virginia.

About First Commonwealth Financial

First Commonwealth Financial Corporation, a financial holding company, provides various consumer and commercial banking services in the United States. Its consumer services include personal checking accounts, interest-earning checking accounts, savings and health savings accounts, insured money market accounts, debit cards, investment certificates, fixed and variable rate certificates of deposit, mortgage loans, secured and unsecured installment loans, construction and real estate loans, safe deposit facilities, credit cards, credit lines with overdraft checking protection, IRA accounts, and automated teller machine (atm) services, as well as internet, mobile, and telephone banking services. The company's commercial banking services comprise commercial lending, business checking accounts, online account management services, payroll direct deposits, commercial cash management services, and repurchase agreements, as well as ACH origination services. In addition, it offers various trust and asset management services; auto, home, and business insurance, as well as term life insurance; and annuities, mutual funds, and stock and bond brokerage services through a broker-dealer and insurance brokers. The company was founded in 1934 and is headquartered in Indiana, Pennsylvania.