First Merchants (NASDAQ: CBTX) and CBTX (NASDAQ:CBTX) are both finance companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, risk, dividends, earnings, analyst recommendations, institutional ownership and profitability.

Profitability

This table compares First Merchants and CBTX’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
First Merchants 28.09% 10.44% 1.45%
CBTX 23.26% 8.29% 1.18%

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for First Merchants and CBTX, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
First Merchants 0 2 1 0 2.33
CBTX 0 2 1 0 2.33

First Merchants presently has a consensus price target of $50.00, suggesting a potential upside of 6.25%. CBTX has a consensus price target of $34.00, suggesting a potential downside of 9.74%. Given First Merchants’ higher probable upside, equities research analysts clearly believe First Merchants is more favorable than CBTX.

Valuation and Earnings

This table compares First Merchants and CBTX’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
First Merchants $385.90 million 6.04 $96.07 million $2.41 19.53
CBTX $130.86 million 7.47 $27.57 million $1.39 27.10

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

Dividends

First Merchants pays an annual dividend of $0.88 per share and has a dividend yield of 1.9%. CBTX pays an annual dividend of $0.20 per share and has a dividend yield of 0.5%. First Merchants pays out 36.5% of its earnings in the form of a dividend. CBTX pays out 14.4% 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. First Merchants has increased its dividend for 6 consecutive years. First Merchants is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

70.3% of First Merchants shares are owned by institutional investors. Comparatively, 23.8% of CBTX shares are owned by institutional investors. 1.4% of First Merchants shares are owned by insiders. Comparatively, 29.1% of CBTX shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Summary

First Merchants beats CBTX on 10 of the 14 factors compared between the two stocks.

First Merchants Company Profile

First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides community banking services. It accepts time, savings, and demand deposits; and provides consumer, commercial, agri-business, and real estate mortgage loans, as well as rents safe deposit facilities. The company also provides personal and corporate trust, full-service brokerage, corporate, letters of credit, and repurchase agreements services. It operates 119 banking locations in 31 Indiana, 2 Illinois, and 2 Ohio counties. The company's delivery channels include ATMs, check cards, remote deposit capture, interactive voice response systems, and Internet technology. First Merchants Corporation was founded in 1893 and is headquartered in Muncie, Indiana.

CBTX Company Profile

CBTX, Inc. operates as the bank holding company for CommunityBank of Texas National Association that provides commercial banking solutions to small and mid-sized businesses, and professionals in the United States. The company's deposit products include checking and savings accounts, certificates of deposit, and money market accounts; and loan portfolio comprises consumer loans, including residential real estate loans, home equity loans, home equity lines of credit, installment loans, unsecured and secured personal lines of credit, overdraft protection, and letters of credit. It also provides commercial and industrial loans, such as commercial lines of credit, working capital loans, term loans, equipment financing, borrowing base loans, restaurant franchisees loans, small business administration loans, and other loan products, as well as acquisition, expansion, and development loans. In addition, the company offers multi-family residential loans comprising loans secured by properties deemed multi-family, which includes apartment buildings; and commercial real estate, construction and development, 1-4 family residential, secured and unsecured term, and home improvement loans. Further, it provides debit card, online banking, mobile banking, e-statement, bank-by-mail, and direct deposit services; and cash management, night depository, and cashier's check services, as well as treasury services, including lockbox, wire transfer, remote deposit capture, and automated clearinghouse services. CBTX, Inc. operates 33 banking locations, including 18 branches in Houston; and 15 branches in Beaumont, Texas. The company was formerly known as CBFH, Inc. and changed its name to CBTX, Inc. in September 2017. CBTX, Inc. was founded in 2007 and is based in Houston, Texas.

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