Head-To-Head Contrast: ConnectOne Bancorp (NASDAQ:CNOB) and Farmers & Merchants Bancorp (NASDAQ:FMAO)

Farmers & Merchants Bancorp (NASDAQ:FMAO) and ConnectOne Bancorp (NASDAQ:CNOB) are both small-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their analyst recommendations, dividends, institutional ownership, earnings, profitability, valuation and risk.

Valuation & Earnings

This table compares Farmers & Merchants Bancorp and ConnectOne Bancorp”s top-line 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	1.93	$33.31 million	$2.42	10.47
ConnectOne Bancorp	$679.93 million	1.90	$80.44 million	$1.50	17.09

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

Analyst Ratings

This is a breakdown of current ratings and price targets for Farmers & Merchants Bancorp and ConnectOne Bancorp, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Farmers & Merchants Bancorp	0	2	0	0	2.00
ConnectOne Bancorp	0	1	3	0	2.75

ConnectOne Bancorp has a consensus target price of $30.67, indicating a potential upside of 19.60%. Given ConnectOne Bancorp’s stronger consensus rating and higher probable upside, analysts clearly believe ConnectOne Bancorp is more favorable than Farmers & Merchants Bancorp.

Dividends

Farmers & Merchants Bancorp pays an annual dividend of $0.92 per share and has a dividend yield of 3.6%. ConnectOne Bancorp pays an annual dividend of $0.72 per share and has a dividend yield of 2.8%. Farmers & Merchants Bancorp pays out 38.0% of its earnings in the form of a dividend. ConnectOne Bancorp pays out 48.0% 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 and ConnectOne Bancorp has raised its dividend for 4 consecutive years. Farmers & Merchants Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Farmers & Merchants Bancorp has a beta of 0.85, indicating that its stock price is 15% less volatile than the S&P 500. Comparatively, ConnectOne Bancorp has a beta of 1.13, indicating that its stock price is 13% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Farmers & Merchants Bancorp	17.47%	9.33%	0.98%
ConnectOne Bancorp	11.83%	9.33%	0.98%

Institutional and Insider Ownership

24.0% of Farmers & Merchants Bancorp shares are owned by institutional investors. Comparatively, 67.7% of ConnectOne Bancorp shares are owned by institutional investors. 7.3% of Farmers & Merchants Bancorp shares are owned by insiders. Comparatively, 6.2% of ConnectOne Bancorp shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Summary

ConnectOne Bancorp beats Farmers & Merchants Bancorp on 8 of the 15 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 ConnectOne Bancorp

ConnectOne Bancorp, Inc. operates as the bank holding company for ConnectOne Bank that provides commercial banking products and services for small and mid-sized businesses, local professionals, and individuals in the New York Metropolitan area and South Florida market. The company offers personal and business checking, money market, and time and savings accounts; credit cards, wire transfers, safe deposit boxes, automated teller services and telephone, and internet and mobile banking. It provides retirement accounts, consumers and cash management services for business clients, including treasury direct, automated clearing house, remote deposit capture, and digital invoicing. In addition, the company offers consumer and commercial business loans, including lines of credit, commercial and residential mortgages, home equity and bridge loans, and other personal loans; commercial loans secured by collateral, such as business assets comprising accounts receivable, inventory and equipment, and mortgages filed on commercial and residential real estate, as well as cash balances and marketable securities. Further, it provides real estate loans, which includes loans secured by first liens on completed commercial properties, including multi-family properties, to purchase or refinance properties; residential mortgages, such as loans secured by first liens on 1-4 family and condominium; and cooperative residential real estate loans. The company was formerly known as Center Bancorp, Inc. and changed its name to ConnectOne Bancorp, Inc. in July 2014. ConnectOne Bancorp, Inc. was incorporated in 1982 and is headquartered in Englewood Cliffs, New Jersey.