Comparing Farmers & Merchants Bancorp (NASDAQ:FMAO) and MainStreet Bank (NASDAQ:MNSB)

Farmers & Merchants Bancorp (NASDAQ:FMAO) and MainStreet Bank (NASDAQ:MNSB) are both small-cap finance companies, but which is the better stock? We will compare the two companies based on the strength of their profitability, analyst recommendations, valuation, institutional ownership, dividends, earnings and risk.

Profitability

This table compares Farmers & Merchants Bancorp and MainStreet Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Farmers & Merchants Bancorp	18.54%	9.85%	1.05%
MainStreet Bank	12.94%	9.13%	0.80%

Volatility and Risk

Farmers & Merchants Bancorp has a beta of 0.82, indicating that its stock price is 18% less volatile than the S&P 500. Comparatively, MainStreet Bank has a beta of 0.55, indicating that its stock price is 45% less volatile than the S&P 500.

Earnings and Valuation

This table compares Farmers & Merchants Bancorp and MainStreet Bank”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Farmers & Merchants Bancorp	$121.83 million	3.17	$33.31 million	$2.61	10.76
MainStreet Bank	$135.62 million	1.25	$15.61 million	$1.99	11.99

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

Analyst Ratings

This is a breakdown of current ratings and target prices for Farmers & Merchants Bancorp and MainStreet Bank, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Farmers & Merchants Bancorp	0	3	1	0	2.25
MainStreet Bank	0	2	0	0	2.00

Farmers & Merchants Bancorp currently has a consensus price target of $28.50, indicating a potential upside of 1.46%. Given Farmers & Merchants Bancorp’s stronger consensus rating and higher possible upside, research analysts clearly believe Farmers & Merchants Bancorp is more favorable than MainStreet Bank.

Institutional & Insider Ownership

24.0% of Farmers & Merchants Bancorp shares are held by institutional investors. Comparatively, 52.3% of MainStreet Bank shares are held by institutional investors. 7.3% of Farmers & Merchants Bancorp shares are held by company insiders. Comparatively, 10.2% of MainStreet Bank shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Farmers & Merchants Bancorp pays an annual dividend of $0.92 per share and has a dividend yield of 3.3%. MainStreet Bank pays an annual dividend of $0.40 per share and has a dividend yield of 1.7%. Farmers & Merchants Bancorp pays out 35.2% of its earnings in the form of a dividend. MainStreet Bank pays out 20.1% 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. Farmers & Merchants Bancorp has raised its dividend for 19 consecutive years. Farmers & Merchants Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Farmers & Merchants Bancorp beats MainStreet Bank on 12 of the 17 factors compared between the two stocks.

About Farmers & Merchants Bancorp

Farmers & Merchants Bancorp, Inc. is a bank holding company, which engages in the provision of commercial banking, retail banking, and financial services. It includes commercial, agricultural, and residential mortgages as well as consumer and credit card lending activities. The firm also offers checking account services, and savings and time deposit services. The company was founded in 1985 and is headquartered in Archbold, OH.

About MainStreet Bank

MainStreet Bancshares, Inc. operates as the bank holding company for MainStreet Bank that provides various banking products and services for individuals, small to medium-sized businesses, and professional service organizations. The company offers demand, NOW, money market, savings, and sweep accounts, as well as certificates of deposit; business and consumer checking, interest-bearing checking, business account analysis, and other depository services; and cash management, wire transfer, check imaging, bill pay, remote deposit capture, and courier services. It also provides commercial loans, include government contract receivables, plant and equipment, general working capital, contract administration, and acquisition loans; commercial real estate, real estate construction, and residential real estate loans; and consumer loans comprising term loans and overdraft protection, as well as debit and credit cards. In addition, the company offers deposit insurance solutions; remote deposit of checks; and internet bill payment, online cash management, and online and mobile banking services. It operates in Herndon, Fairfax, McLean, Leesburg, Clarendon, and Washington D.C., as well as automated teller machines. The company was incorporated in 2003 and is headquartered in Fairfax, Virginia.