Critical Review: Commerce Bancshares (NASDAQ:CBSH) vs. Old Second Bancorp (NASDAQ:OSBC)

Commerce Bancshares (NASDAQ:CBSH) and Old Second Bancorp (NASDAQ:OSBC) are both finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, risk, profitability, valuation, analyst recommendations, dividends and institutional ownership.

Valuation & Earnings

This table compares Commerce Bancshares and Old Second Bancorp”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Commerce Bancshares	$2.09 billion	3.79	$526.33 million	$4.20	14.09
Old Second Bancorp	$341.72 million	2.66	$85.26 million	$1.83	9.43

Commerce Bancshares has higher revenue and earnings than Old Second Bancorp. Old Second Bancorp is trading at a lower price-to-earnings ratio than Commerce Bancshares, indicating that it is currently the more affordable of the two stocks.

Dividends

Commerce Bancshares pays an annual dividend of $1.10 per share and has a dividend yield of 1.9%. Old Second Bancorp pays an annual dividend of $0.24 per share and has a dividend yield of 1.4%. Commerce Bancshares pays out 26.2% of its earnings in the form of a dividend. Old Second Bancorp pays out 13.1% 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. Commerce Bancshares has raised its dividend for 58 consecutive years and Old Second Bancorp has raised its dividend for 1 consecutive years. Commerce Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Commerce Bancshares and Old Second Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Commerce Bancshares	26.37%	16.01%	1.74%
Old Second Bancorp	24.38%	12.53%	1.51%

Risk & Volatility

Commerce Bancshares has a beta of 0.59, suggesting that its share price is 41% less volatile than the S&P 500. Comparatively, Old Second Bancorp has a beta of 0.8, suggesting that its share price is 20% less volatile than the S&P 500.

Analyst Ratings

This is a summary of current recommendations for Commerce Bancshares and Old Second Bancorp, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Commerce Bancshares	1	8	0	0	1.89
Old Second Bancorp	0	1	4	1	3.00

Commerce Bancshares presently has a consensus target price of $68.17, suggesting a potential upside of 15.20%. Old Second Bancorp has a consensus target price of $21.38, suggesting a potential upside of 23.84%. Given Old Second Bancorp’s stronger consensus rating and higher possible upside, analysts plainly believe Old Second Bancorp is more favorable than Commerce Bancshares.

Insider and Institutional Ownership

70.3% of Commerce Bancshares shares are held by institutional investors. Comparatively, 67.8% of Old Second Bancorp shares are held by institutional investors. 3.1% of Commerce Bancshares shares are held by company insiders. Comparatively, 3.8% of Old Second Bancorp shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Summary

Commerce Bancshares beats Old Second Bancorp on 11 of the 18 factors compared between the two stocks.

About Commerce Bancshares

Commerce Bancshares, Inc. operates as the bank holding company for Commerce Bank that provides retail, mortgage banking, corporate, investment, trust, and asset management products and services to individuals and businesses in the United States. It operates through three segments: Consumer, Commercial, and Wealth. The Consumer segment offers various banking products and services, including consumer deposits; consumer loans, such as automobile, motorcycle, marine, tractor/trailer, recreational vehicle, fixed rate and revolving home equity, and other consumer loans; patient health care financing; real estate loans; indirect and other consumer financing; retail branch network; personal mortgage banking; consumer installment lending; and consumer debit and credit bank cards. The Commercial segment provides corporate lending, leasing, international, merchant and commercial bank card, and securities safekeeping and bond accounting services; and business products, government deposits, and related commercial cash management services, as well as sells fixed income securities to correspondent banks, corporations, public institutions, municipalities, and individuals. The Wealth segment provides traditional trust and estate planning, advisory and discretionary investment portfolio management, and brokerage services, as well as private banking accounts. The company also offers private equity investment, securities brokerage, insurance agency, specialty lending, and leasing services, as well as online and mobile banking services. Commerce Bancshares, Inc. was founded in 1865 and is headquartered in Kansas City, Missouri.

About Old Second Bancorp

Old Second Bancorp, Inc. operates as the bank holding company for Old Second National Bank that provides community banking services. It offers demand, NOW, money market, savings, time deposit, individual retirement, and checking accounts, as well as certificates of deposit accounts. The company also provides commercial loans; lease financing receivables; commercial real estate loans; construction loans; residential real estate loans, such as residential first mortgage and second mortgage loans; home equity line of credit; consumer loans, including motor vehicle, home improvement, and signature loans; installment and agricultural loans; residential mortgages; and overdraft checking. In addition, it offers safe deposit services; trust and wealth management services; and money orders, cashier’s checks, foreign currency, direct deposits, discount brokerage, debit and credit cards, and other services, as well as acquires the U.S. treasury notes and bonds. Further, the company provides online and mobile banking; corporate cash management products, including remote and mobile deposits capture, investment sweep accounts, zero balance accounts, automated tax payments, automatic teller machines access, telephone banking, lockbox accounts, automated clearing house transactions, account reconciliation, controlled disbursement, detail and general information reporting, foreign and domestic wire transfers, and vault services for currency and coin; and investment, agency, and custodial services for individual, corporate, and not-for-profit clients. Old Second Bancorp, Inc. was incorporated in 1981 and is headquartered in Aurora, Illinois.