Webster Financial (NYSE:WBS) & Merchants Bancorp (NASDAQ:MBIN) Financial Review

Merchants Bancorp (NASDAQ:MBIN) and Webster Financial (NYSE:WBS) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, valuation, dividends, analyst recommendations, risk, profitability and earnings.

Valuation and Earnings

This table compares Merchants Bancorp and Webster Financial”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Merchants Bancorp	$1.37 billion	1.51	$218.77 million	$3.78	11.92
Webster Financial	$4.42 billion	2.67	$1.00 billion	$5.91	12.40

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

Risk & Volatility

Merchants Bancorp has a beta of 1.27, meaning that its share price is 27% more volatile than the S&P 500. Comparatively, Webster Financial has a beta of 1.07, meaning that its share price is 7% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and target prices for Merchants Bancorp and Webster Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Merchants Bancorp	0	2	2	1	2.80
Webster Financial	0	10	6	0	2.38

Merchants Bancorp presently has a consensus target price of $41.00, suggesting a potential downside of 9.01%. Webster Financial has a consensus target price of $74.36, suggesting a potential upside of 1.48%. Given Webster Financial’s higher probable upside, analysts clearly believe Webster Financial is more favorable than Merchants Bancorp.

Insider and Institutional Ownership

24.6% of Merchants Bancorp shares are held by institutional investors. Comparatively, 85.6% of Webster Financial shares are held by institutional investors. 34.8% of Merchants Bancorp shares are held by insiders. Comparatively, 0.5% of Webster Financial shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Merchants Bancorp and Webster Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Merchants Bancorp	16.02%	13.35%	1.15%
Webster Financial	22.67%	11.10%	1.22%

Dividends

Merchants Bancorp pays an annual dividend of $0.40 per share and has a dividend yield of 0.9%. Webster Financial pays an annual dividend of $1.60 per share and has a dividend yield of 2.2%. Merchants Bancorp pays out 10.6% of its earnings in the form of a dividend. Webster Financial pays out 27.1% 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. Merchants Bancorp has raised its dividend for 8 consecutive years.

Summary

Webster Financial beats Merchants Bancorp on 11 of the 18 factors compared between the two stocks.

About Merchants Bancorp

Merchants Bancorp operates as the diversified bank holding company in the United States. It operates through three segments: Multi-family Mortgage Banking, Mortgage Warehousing, and Banking. The Multi-family Mortgage Banking segment engages in the mortgage banking, which originates and services government sponsored mortgages, including bridge financing products to refinance, acquire, or reposition multi-family housing projects, and construction lending for multi-family and healthcare facilities. This segment also offers customized loan products for need-based skilled nursing facilities, such as independent living, assisted living, and memory care; and tax credit equity syndicator service. The Mortgage Warehousing segment funds agency eligible residential loans, as well as commercial loans to non-depository financial institutions. The Banking segment offers a range of financial products and services to consumers and businesses, which includes retail banking, commercial lending, agricultural lending, retail and correspondent residential mortgage banking, and small business administration lending. Merchants Bancorp was founded in 1990 and is headquartered in Carmel, Indiana.

About Webster Financial

Webster Financial Corporation operates as the bank holding company for Webster Bank, National Association that provides a range of financial products and services to individuals, families, and businesses in the United States. It operates through three segments: Commercial Banking, HSA Bank, and Consumer Banking. The Commercial Banking segment offers commercial real estate and equipment financing, business banking, asset-based lending, and commercial services; public sector finance; mortgage warehouse financing; sponsor and specialty financing services; credit, deposit, and cash flow management services; and wealth management solutions to business owners and operators, including trust, asset management, financial planning, insurance, retirement, and investment products, as well as treasury management services comprising derivative, treasury, accounts payable, accounts receivable, and trade products and services. This segment also provides commercial services, such as accounts receivable factoring and trade financing, payroll funding, and business process outsourcing. The HSA Bank segment offers health savings accounts, health reimbursement arrangements, flexible spending accounts, and commuter benefit services that are distributed directly to employers and individual consumers, as well as through national and regional insurance carriers, benefit consultants, and financial advisors. The Consumer Banking segment provides consumer deposit and fee-based services, residential mortgages, home equity lines, secured and unsecured loans, and credit cards to consumers; and small business banking products, such as credit, deposit, and cash flow management products to businesses and professional service firms. The company offers online and mobile banking services. Webster Financial Corporation was founded in 1935 and is headquartered in Stamford, Connecticut.