Financial Contrast: First Merchants (NASDAQ:FRME) and Westamerica Bancorporation (NASDAQ:WABC)

Westamerica Bancorporation (NASDAQ:WABC) and First Merchants (NASDAQ:FRME) are both finance companies, but which is the better stock? We will compare the two businesses based on the strength of their profitability, earnings, dividends, risk, valuation, institutional ownership and analyst recommendations.

Valuation & Earnings

This table compares Westamerica Bancorporation and First Merchants”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Westamerica Bancorporation	$327.54 million	3.99	$161.77 million	$5.92	8.27
First Merchants	$631.34 million	3.41	$223.79 million	$3.47	10.60

First Merchants has higher revenue and earnings than Westamerica Bancorporation. Westamerica Bancorporation is trading at a lower price-to-earnings ratio than First Merchants, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Westamerica Bancorporation has a beta of 0.55, suggesting that its share price is 45% less volatile than the S&P 500. Comparatively, First Merchants has a beta of 1.02, suggesting that its share price is 2% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Westamerica Bancorporation and First Merchants, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Westamerica Bancorporation	0	3	0	0	2.00
First Merchants	0	2	3	0	2.60

Westamerica Bancorporation presently has a consensus price target of $57.00, indicating a potential upside of 16.47%. First Merchants has a consensus price target of $42.20, indicating a potential upside of 14.71%. Given Westamerica Bancorporation’s higher probable upside, analysts clearly believe Westamerica Bancorporation is more favorable than First Merchants.

Profitability

This table compares Westamerica Bancorporation and First Merchants’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Westamerica Bancorporation	47.12%	20.17%	2.38%
First Merchants	17.77%	9.17%	1.09%

Dividends

Westamerica Bancorporation pays an annual dividend of $1.76 per share and has a dividend yield of 3.6%. First Merchants pays an annual dividend of $1.40 per share and has a dividend yield of 3.8%. Westamerica Bancorporation pays out 29.7% of its earnings in the form of a dividend. First Merchants pays out 40.3% 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. Westamerica Bancorporation has increased its dividend for 32 consecutive years and First Merchants has increased its dividend for 13 consecutive years.

Institutional and Insider Ownership

81.9% of Westamerica Bancorporation shares are held by institutional investors. Comparatively, 73.9% of First Merchants shares are held by institutional investors. 4.4% of Westamerica Bancorporation shares are held by insiders. Comparatively, 1.3% of First Merchants shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Summary

Westamerica Bancorporation beats First Merchants on 10 of the 17 factors compared between the two stocks.

About Westamerica Bancorporation

Westamerica Bancorporation operates as a bank holding company for the Westamerica Bank that provides various banking products and services to individual and commercial customers. The company accepts various deposit products, including retail savings and checking accounts, as well as certificates of deposit. Its loan portfolio includes commercial, commercial and residential real estate, real estate construction, and consumer installment loans, as well as indirect automobile loans. The company was formerly known as Independent Bankshares Corporation and changed its name to Westamerica Bancorporation in 1983. The company was founded in 1884 and is headquartered in San Rafael, California.

About First Merchants

First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides community banking services. The company offers a range of financial services, including time, savings, and demand deposits; and consumer, commercial, agri-business, public finance, and real estate mortgage loans. It also provides personal and corporate trust; brokerage and private wealth management; and letters of credit, repurchase agreements, and other corporate services. The company operates banking locations in Indiana, Illinois, Ohio, and Michigan counties. It also offers its services through electronic and mobile delivery channels. First Merchants Corporation was founded in 1893 and is headquartered in Muncie, Indiana.