Contrasting Mercantile Bank (NASDAQ:MBWM) and Peoples Bancorp (NASDAQ:PEBO)

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

Insider & Institutional Ownership

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

Analyst Recommendations

This is a summary of current 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	4	0	2.57
Peoples Bancorp	0	3	3	0	2.50

Mercantile Bank presently has a consensus target price of $56.20, suggesting a potential upside of 5.52%. Peoples Bancorp has a consensus target price of $37.00, suggesting a potential upside of 3.55%. Given Mercantile Bank’s stronger consensus rating and higher probable upside, analysts clearly believe Mercantile Bank is more favorable than Peoples Bancorp.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Mercantile Bank	$371.80 million	2.47	$88.75 million	$5.57	9.56
Peoples Bancorp	$618.38 million	2.08	$106.78 million	$3.12	11.45

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.

Dividends

Mercantile Bank pays an annual dividend of $1.56 per share and has a dividend yield of 2.9%. Peoples Bancorp pays an annual dividend of $1.68 per share and has a dividend yield of 4.7%. Mercantile Bank pays out 28.0% of its earnings in the form of a dividend. Peoples Bancorp pays out 53.8% 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. Mercantile Bank has increased its dividend for 14 consecutive years and Peoples Bancorp has increased its dividend for 10 consecutive years.

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	24.19%	13.73%	1.44%
Peoples Bancorp	17.92%	9.75%	1.21%

Risk and Volatility

Mercantile Bank has a beta of 0.81, meaning that its stock price is 19% less volatile than the S&P 500. Comparatively, Peoples Bancorp has a beta of 0.62, meaning that its stock price is 38% less volatile than the S&P 500.

Summary

Mercantile Bank beats Peoples Bancorp on 11 of the 17 factors compared between the two stocks.

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.

About Peoples Bancorp

Peoples Bancorp Inc. operates as the holding company for Peoples Bank that provides commercial and consumer banking products and services. The company accepts various deposit products, including demand deposit accounts, savings accounts, money market accounts, certificates of deposit, and governmental deposits; and provides commercial and industrial, commercial real estate, construction, finance, residential real estate, and consumer indirect and direct loans, as well as home equity lines of credit and overdrafts. It also offers debit and automated teller machine (ATM) cards; safe deposit rental facilities; money orders and cashier’s checks; and telephone, mobile, and online banking services. In addition, the company provides various life, health, and property and casualty insurance products; third-party insurance administration; interactive teller machines; insurance premium financing; check deposit and alert notification; commercial and technology equipment leasing; fiduciary and trust; underwriting, origination, and servicing of equipment leases, and equipment financing agreements; and asset management and administration services, as well as employee benefit, retirement, and health care plan administration services. Further, it offers brokerage services through an unaffiliated registered broker-dealers; insurance premium finance lending and leasing; and credit cards to individuals and businesses, as well as provides merchant credit card transaction processing, and person-to-person payment processing services. Peoples Bancorp Inc. was founded in 1902 and is headquartered in Marietta, Ohio.