Critical Analysis: Simmons First National (NASDAQ:SFNC) & Farmers & Merchants Bancorp (OTCMKTS:FMCB)

Simmons First National (NASDAQ:SFNC) and Farmers & Merchants Bancorp (OTCMKTS:FMCB) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their risk, earnings, analyst recommendations, valuation, profitability, dividends and institutional ownership.

Profitability

This table compares Simmons First National and Farmers & Merchants Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Simmons First National	10.46%	5.10%	0.65%
Farmers & Merchants Bancorp	30.22%	15.22%	1.62%

Analyst Ratings

This is a summary of current ratings for Simmons First National and Farmers & Merchants Bancorp, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Simmons First National	1	1	1	0	2.00
Farmers & Merchants Bancorp	0	0	0	0	0.00

Simmons First National currently has a consensus price target of $23.33, suggesting a potential upside of 14.44%. Given Simmons First National’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Simmons First National is more favorable than Farmers & Merchants Bancorp.

Risk & Volatility

Simmons First National has a beta of 0.84, indicating that its stock price is 16% less volatile than the S&P 500. Comparatively, Farmers & Merchants Bancorp has a beta of 0.21, indicating that its stock price is 79% less volatile than the S&P 500.

Insider and Institutional Ownership

27.6% of Simmons First National shares are owned by institutional investors. Comparatively, 5.6% of Farmers & Merchants Bancorp shares are owned by institutional investors. 1.9% of Simmons First National shares are owned by insiders. Comparatively, 8.0% of Farmers & Merchants Bancorp shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares Simmons First National and Farmers & Merchants Bancorp”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Simmons First National	$208.50 million	12.30	$152.69 million	$1.21	16.85
Farmers & Merchants Bancorp	$292.68 million	2.40	$88.46 million	$121.02	8.29

Simmons First National has higher earnings, but lower revenue than Farmers & Merchants Bancorp. Farmers & Merchants Bancorp is trading at a lower price-to-earnings ratio than Simmons First National, indicating that it is currently the more affordable of the two stocks.

Dividends

Simmons First National pays an annual dividend of $0.85 per share and has a dividend yield of 4.2%. Farmers & Merchants Bancorp pays an annual dividend of $18.60 per share and has a dividend yield of 1.9%. Simmons First National pays out 70.2% of its earnings in the form of a dividend. Farmers & Merchants Bancorp pays out 15.4% 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. Simmons First National has increased its dividend for 14 consecutive years. Simmons First National is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Simmons First National beats Farmers & Merchants Bancorp on 10 of the 17 factors compared between the two stocks.

About Simmons First National

Simmons First National Corporation operates as the holding company for Simmons Bank that provides banking and other financial products and services to individuals and businesses. The company offers checking, savings, and time deposits; consumer, real estate, and commercial loans; agricultural finance, equipment, and small business administration lending; trust and fiduciary services; credit cards; investment management products; treasury management; insurance products; and securities and investment services. It also provides ATM services; Internet and mobile banking platforms; overdraft facilities; and safe deposit boxes. The company was founded in 1903 and is headquartered in Pine Bluff, Arkansas.

About Farmers & Merchants Bancorp

Farmers & Merchants Bancorp operates as the bank holding company for Farmers & Merchants Bank of Central California that provides various banking services to businesses and individuals. The company accepts various deposit products, including checking, savings, money market, time certificates of deposit, and individual retirement accounts. It also offers range of lending products comprising commercial and residential real estate, real estate construction, agribusiness, and consumer loans, as well as equipment leases and credit card services; commercial products, including term loans, lines of credit and other working capital financing, and letters of credit; and financing products, such as automobile financing, home improvement, and home equity lines of credit. In addition, the company provides various specialized services consisting of credit card programs for merchants, lockbox and other collection services, account reconciliation, investment sweep, online account access, and electronic funds transfers through domestic and international wire and automated clearinghouse; online banking services; and investment products, such as mutual funds and annuities. The company was founded in 1916 and is headquartered in Lodi, California.