Capstar Financial Holdings (NASDAQ: CSTR) and Merchants Bancshares,Inc. (NASDAQ:MBVT) are both finance companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, analyst recommendations, risk, profitability, dividends, valuation and earnings.

Dividends

Merchants Bancshares,Inc. pays an annual dividend of $1.12 per share and has a dividend yield of 2.2%. Capstar Financial Holdings does not pay a dividend. Merchants Bancshares,Inc. pays out 52.1% of its earnings in the form of a dividend.

Analyst Recommendations

This is a summary of recent ratings for Capstar Financial Holdings and Merchants Bancshares,Inc., as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capstar Financial Holdings 0 5 0 0 2.00
Merchants Bancshares,Inc. 0 1 0 0 2.00

Capstar Financial Holdings presently has a consensus target price of $19.00, suggesting a potential upside of 7.77%. Given Capstar Financial Holdings’ higher possible upside, analysts plainly believe Capstar Financial Holdings is more favorable than Merchants Bancshares,Inc..

Insider & Institutional Ownership

35.4% of Capstar Financial Holdings shares are owned by institutional investors. Comparatively, 38.6% of Merchants Bancshares,Inc. shares are owned by institutional investors. 19.3% of Capstar Financial Holdings shares are owned by company insiders. Comparatively, 8.8% of Merchants Bancshares,Inc. shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Capstar Financial Holdings and Merchants Bancshares,Inc.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Capstar Financial Holdings 3.40% 7.70% 0.79%
Merchants Bancshares,Inc. 20.64% 9.19% 0.71%

Earnings and Valuation

This table compares Capstar Financial Holdings and Merchants Bancshares,Inc.’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Capstar Financial Holdings $36.95 million 5.36 $2.25 million $0.20 88.15
Merchants Bancshares,Inc. N/A N/A N/A $2.15 23.16

Capstar Financial Holdings has higher revenue and earnings than Merchants Bancshares,Inc.. Merchants Bancshares,Inc. is trading at a lower price-to-earnings ratio than Capstar Financial Holdings, indicating that it is currently the more affordable of the two stocks.

About Capstar Financial Holdings

CapStar Financial Holdings, Inc. is a bank holding company. The Company operates primarily through its subsidiary, CapStar Bank. CapStar Bank is a commercial bank. The Company’s lines of business include commercial and industrial, commercial real estate, healthcare, correspondent banking, personal and private banking and wealth management, and mortgage banking. Its products and services include commercial and industrial loans to small and medium sized businesses, with a particular focus on businesses operating in the healthcare industry; commercial real estate loans; private banking and wealth management services for the owners and operators of business clients and other high net worth individuals, and correspondent banking services. As of June 30, 2016, the Company had seven locations, five of which are retail bank branches and two of which are mortgage origination offices.

About Merchants Bancshares,Inc.

Merchants Bancshares, Inc. is a bank holding company. The Company’s subsidiary, Merchants Bank (the Bank), is a commercial bank. The Bank offers a range of deposit, loan, cash management and trust services to meet the financial needs of individual consumers, businesses and municipalities. Merchants Bank’s trust division offers investment management, financial planning and trustee services. The Bank offers commercial, financial and agricultural loans, municipal loans, residential real estate loans, commercial real estate loans, construction real estate loans and consumer installment loans for various personal needs, including vehicle and boat financing. The Bank’s deposits include demand; savings and interest bearing checking and money market accounts, and time deposits.

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