Mercantile Bank (NASDAQ:MBWM) & QCR (NASDAQ:QCRH) Financial Review

QCR (NASDAQ:QCRH) and Mercantile Bank (NASDAQ:MBWM) are both small-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their analyst recommendations, valuation, institutional ownership, risk, profitability, dividends and earnings.

Insider and Institutional Ownership

70.0% of QCR shares are owned by institutional investors. Comparatively, 58.6% of Mercantile Bank shares are owned by institutional investors. 3.7% of QCR shares are owned by company insiders. Comparatively, 3.2% of Mercantile Bank shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

QCR pays an annual dividend of $0.24 per share and has a dividend yield of 0.3%. Mercantile Bank pays an annual dividend of $1.52 per share and has a dividend yield of 3.1%. QCR pays out 3.6% of its earnings in the form of a dividend. Mercantile Bank pays out 30.2% 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 raised its dividend for 14 consecutive years. Mercantile Bank is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for QCR and Mercantile Bank, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
QCR	0	0	4	0	3.00
Mercantile Bank	0	1	3	0	2.75

QCR currently has a consensus target price of $87.38, suggesting a potential upside of 11.52%. Mercantile Bank has a consensus target price of $55.25, suggesting a potential upside of 13.50%. Given Mercantile Bank’s higher possible upside, analysts plainly believe Mercantile Bank is more favorable than QCR.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
QCR	$597.39 million	2.22	$113.85 million	$6.64	11.80
Mercantile Bank	$361.89 million	2.19	$79.59 million	$5.04	9.66

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

Profitability

This table compares QCR and Mercantile Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
QCR	19.43%	11.71%	1.30%
Mercantile Bank	22.11%	13.52%	1.34%

Volatility and Risk

QCR has a beta of 0.87, meaning that its share price is 13% less volatile than the S&P 500. Comparatively, Mercantile Bank has a beta of 0.95, meaning that its share price is 5% less volatile than the S&P 500.

Summary

QCR beats Mercantile Bank on 10 of the 17 factors compared between the two stocks.

About QCR

QCR Holdings, Inc., a multi-bank holding company, provides commercial and consumer banking, and trust and asset management services. The company’s deposit products include noninterest-bearing demand, interest-bearing demand, time, and brokered deposits. It also provides various commercial and retail lending/leasing, and investment services to corporations, partnerships, individuals, and government agencies. The company’s loan portfolio comprises loans to small and mid-sized businesses; business loans, including lines of credit for working capital and operational purposes; term loans for the acquisition of facilities, equipment, and other purposes; commercial and residential real estate loans; and installment and other consumer loans, such as home improvement, home equity, motor vehicle, and signature loans, as well as small personal credit lines. In addition, it engages in leasing of machinery and equipment to commercial and industrial businesses under direct financing lease contracts; and issuance of trust preferred securities. QCR Holdings, Inc. was incorporated in 1993 and is headquartered in Moline, Illinois.

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.