Head-To-Head Survey: First Merchants (NASDAQ:FRME) vs. Commercial National Financial (OTCMKTS:CEFC)

Commercial National Financial (OTCMKTS:CEFC) and First Merchants (NASDAQ:FRME) are both finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their valuation, institutional ownership, analyst recommendations, profitability, dividends, risk and earnings.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Commercial National Financial and First Merchants, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Commercial National Financial	0	0	0	0	0.00
First Merchants	0	3	3	1	2.71

First Merchants has a consensus target price of $48.00, suggesting a potential upside of 29.73%. Given First Merchants’ stronger consensus rating and higher probable upside, analysts clearly believe First Merchants is more favorable than Commercial National Financial.

Profitability

This table compares Commercial National Financial and First Merchants’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Commercial National Financial	22.02%	N/A	N/A
First Merchants	21.35%	9.88%	1.23%

Volatility & Risk

Commercial National Financial has a beta of 0.39, suggesting that its stock price is 61% less volatile than the S&P 500. Comparatively, First Merchants has a beta of 1.05, suggesting that its stock price is 5% more volatile than the S&P 500.

Insider and Institutional Ownership

73.9% of First Merchants shares are held by institutional investors. 23.0% of Commercial National Financial shares are held by company insiders. Comparatively, 1.4% of First Merchants 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.

Earnings and Valuation

This table compares Commercial National Financial and First Merchants”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Commercial National Financial	$29.17 million	1.65	$5.86 million	$1.60	7.56
First Merchants	$1.07 billion	1.99	$201.40 million	$3.86	9.59

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

Dividends

Commercial National Financial pays an annual dividend of $0.56 per share and has a dividend yield of 4.6%. First Merchants pays an annual dividend of $1.44 per share and has a dividend yield of 3.9%. Commercial National Financial pays out 35.0% of its earnings in the form of a dividend. First Merchants pays out 37.3% 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 raised its dividend for 13 consecutive years. Commercial National Financial is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

First Merchants beats Commercial National Financial on 14 of the 18 factors compared between the two stocks.

About Commercial National Financial

Commercial National Financial Corporation operates as the holding company for Commercial Bank that provides various banking products and services to individuals, agricultural businesses, commercial businesses, and light industries in Michigan. The company accepts various deposit products, including checking and savings accounts, individual retirement accounts, certificates of deposit, and health savings accounts. It also offers personal loan products, such as automobile loans, recreational vehicle loans, personal lines of credit, and unsecured term loans, as well as home equity loans and mortgage loans; and business loans, including secured lines of credit, business equity line of credit, SBA loans, equipment loans, real estate loans, vehicle loans, term loans, USDA loan programs, and capital access loan programs. In addition, the company provides other services comprising business VISA check cards, debit and ATM cards, business statement savings, business certificates of deposit, merchant services, night depository, telephone banking, online banking, e-statements, direct deposit of payroll for employees, child support payments, collection of receivables, and remote deposit capture, as well as treasury services. It provides its services through offices located in Barry, Gratiot, Ingham, Kent, and Montcalm counties in Michigan. The company was founded in 1893 and is headquartered in Ithaca, Michigan.

About First Merchants

First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides community banking services. The company offers a range of financial services, including time, savings, and demand deposits; and consumer, commercial, agri-business, public finance, and real estate mortgage loans. It also provides personal and corporate trust; brokerage and private wealth management; and letters of credit, repurchase agreements, and other corporate services. The company operates banking locations in Indiana, Illinois, Ohio, and Michigan counties. It also offers its services through electronic and mobile delivery channels. First Merchants Corporation was founded in 1893 and is headquartered in Muncie, Indiana.