Comparing Bank of America (NYSE:BAC) and Farmers & Merchants Bancorp (NASDAQ:FMAO)

Farmers & Merchants Bancorp (NASDAQ:FMAO) and Bank of America (NYSE:BAC) are both finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, analyst recommendations, dividends, earnings, profitability, valuation and institutional ownership.

Dividends

Farmers & Merchants Bancorp pays an annual dividend of $0.96 per share and has a dividend yield of 2.7%. Bank of America pays an annual dividend of $1.28 per share and has a dividend yield of 2.4%. Farmers & Merchants Bancorp pays out 33.0% of its earnings in the form of a dividend. Bank of America pays out 29.4% 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. Farmers & Merchants Bancorp has increased its dividend for 19 consecutive years and Bank of America has increased its dividend for 11 consecutive years. Farmers & Merchants Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Farmers & Merchants Bancorp has a beta of 0.81, meaning that its share price is 19% less volatile than the S&P 500. Comparatively, Bank of America has a beta of 1.21, meaning that its share price is 21% more volatile than the S&P 500.

Earnings and Valuation

This table compares Farmers & Merchants Bancorp and Bank of America”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Farmers & Merchants Bancorp	$190.68 million	2.53	$33.31 million	$2.91	12.02
Bank of America	$191.57 billion	1.97	$30.51 billion	$4.36	12.40

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Farmers & Merchants Bancorp	20.27%	10.72%	1.16%
Bank of America	17.56%	12.20%	0.98%

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Farmers & Merchants Bancorp and Bank of America, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Farmers & Merchants Bancorp	0	3	1	0	2.25
Bank of America	0	7	19	0	2.73

Farmers & Merchants Bancorp currently has a consensus price target of $32.25, suggesting a potential downside of 7.80%. Bank of America has a consensus price target of $64.22, suggesting a potential upside of 18.82%. Given Bank of America’s stronger consensus rating and higher possible upside, analysts clearly believe Bank of America is more favorable than Farmers & Merchants Bancorp.

Institutional and Insider Ownership

24.0% of Farmers & Merchants Bancorp shares are owned by institutional investors. Comparatively, 70.7% of Bank of America shares are owned by institutional investors. 7.3% of Farmers & Merchants Bancorp shares are owned by insiders. Comparatively, 0.3% of Bank of America shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

Bank of America beats Farmers & Merchants Bancorp on 11 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 Bank of America

Bank of America Corporation, through its subsidiaries, provides banking and financial products and services for individual consumers, small and middle-market businesses, institutional investors, large corporations, and governments worldwide. It operates in four segments: Consumer Banking, Global Wealth & Investment Management (GWIM), Global Banking, and Global Markets. The Consumer Banking segment offers traditional and money market savings accounts, certificates of deposit and IRAs, non-interest and interest-bearing checking accounts, and investment accounts and products; credit and debit cards; residential mortgages, and home equity loans; and direct and indirect loans, such as automotive, recreational vehicle, and consumer personal loans. The GWIM segment provides investment management, brokerage, banking, and trust and retirement products and services; wealth management solutions; and customized solutions, including specialty asset management services. The Global Banking segment offers lending products and services, including commercial loans, leases, commitment facilities, trade finance, and commercial real estate and asset-based lending; treasury solutions, such as treasury management, foreign exchange, short-term investing options, and merchant services; working capital management solutions; debt and equity underwriting and distribution, and merger-related and other advisory services; and fixed-income and equity research, and certain market-based services. The Global Markets segment provides market-making, financing, securities clearing, settlement, and custody services; securities and derivative products; and risk management products using interest rate, equity, credit, currency and commodity derivatives, foreign exchange, fixed-income, and mortgage-related products. Bank of America Corporation was founded in 1784 and is based in Charlotte, North Carolina.