Critical Review: F & M Bank (OTCMKTS:FMBM) vs. S&T Bancorp (NASDAQ:STBA)

S&T Bancorp (NASDAQ:STBA) and F & M Bank (OTCMKTS:FMBM) are both small-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their analyst recommendations, profitability, earnings, dividends, valuation, risk and institutional ownership.

Earnings & Valuation

This table compares S&T Bancorp and F & M Bank”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
S&T Bancorp	$568.51 million	2.98	$134.23 million	$3.50	12.65
F & M Bank	$78.92 million	1.43	$11.23 million	$3.17	10.02

S&T Bancorp has higher revenue and earnings than F & M Bank. F & M Bank is trading at a lower price-to-earnings ratio than S&T Bancorp, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of current recommendations for S&T Bancorp and F & M Bank, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
S&T Bancorp	0	3	2	1	2.67
F & M Bank	0	0	0	0	0.00

S&T Bancorp currently has a consensus target price of $42.25, indicating a potential downside of 4.58%. Given S&T Bancorp’s stronger consensus rating and higher possible upside, research analysts plainly believe S&T Bancorp is more favorable than F & M Bank.

Risk & Volatility

S&T Bancorp has a beta of 0.93, meaning that its share price is 7% less volatile than the S&P 500. Comparatively, F & M Bank has a beta of 0.29, meaning that its share price is 71% less volatile than the S&P 500.

Dividends

S&T Bancorp pays an annual dividend of $1.44 per share and has a dividend yield of 3.3%. F & M Bank pays an annual dividend of $1.04 per share and has a dividend yield of 3.3%. S&T Bancorp pays out 41.1% of its earnings in the form of a dividend. F & M Bank pays out 32.8% 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. S&T Bancorp has increased its dividend for 13 consecutive years. F & M Bank is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares S&T Bancorp and F & M Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
S&T Bancorp	23.61%	9.25%	1.37%
F & M Bank	14.23%	11.72%	0.85%

Insider & Institutional Ownership

65.2% of S&T Bancorp shares are owned by institutional investors. Comparatively, 3.9% of F & M Bank shares are owned by institutional investors. 1.2% of S&T Bancorp shares are owned by company insiders. Comparatively, 11.6% of F & M Bank shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Summary

S&T Bancorp beats F & M Bank on 14 of the 18 factors compared between the two stocks.

About S&T Bancorp

S&T Bancorp, Inc. is a bank holding company, which engages in the provision of consumer, commercial, and small business banking services. It operates through the following segments: Commercial Real Estate, Commercial and Industrial, Commercial Construction, Business Banking, Consumer Real Estate, and Other Consumer. The Commercial Real Estate segment includes both owner-occupied properties and investment properties for various purposes such as hotels, retail, multifamily and health care. The Commercial and Industrial segment focuses on the companies or manufacturers for the purpose of production, operating capacity, accounts receivable, inventory or equipment financing. The Commercial Construction segment refers to the finance construction of buildings or other structures, as well as to finance the acquisition and development of raw land for various purposes. The Business Banking segment is made to small businesses that are standard, non-complex products evaluated through a streamlined credit approval process that has been designed to maximize efficiency while maintaining high credit quality standards. The Consumer Real Estate segment offers first and second liens such as 1-4 family residential mortgages, home equity loans and home equity lines of credit. The Other Consumer segment consists of individuals that may be secured by assets other than 1-4 family residences, as well as unsecured loans. The company was founded on March 17, 1983 and is headquartered in Indiana, PA.

About F & M Bank

F & M Bank Corp. operates as the bank holding company for Farmers & Merchants Bank that provides financial products and services to consumers and businesses in Virginia. The company offers commercial and individual demand and time deposit accounts, savings accounts, money market accounts, internet and mobile banking services, and drive-in banking services. It also provides construction loans, including residential, and land acquisition and development loans; commercial real estate loans; business loans; consumer loans, such as personal loans, automobile loans, deposit account loans, installment and demand loans, and home equity loans; residential mortgage loans; credit cards; dealer finance; farmland loans; multi-family loans; and commercial and industrial loans. In addition, the company offers brokerage services and commercial and personal insurance products. Further, it originates conventional and government agency sponsored mortgages; and offers title insurance and real estate settlement services. The company was founded in 1908 and is headquartered in Timberville, Virginia.