Franklin Financial Services (NASDAQ:FRAF – Get Free Report) and Independent Bank (NASDAQ:IBCP – Get Free Report) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, dividends, earnings, risk, analyst recommendations, valuation and profitability.
Risk & Volatility
Franklin Financial Services has a beta of 0.3, suggesting that its stock price is 70% less volatile than the S&P 500. Comparatively, Independent Bank has a beta of 0.99, suggesting that its stock price is 1% less volatile than the S&P 500.
Profitability
This table compares Franklin Financial Services and Independent Bank’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Franklin Financial Services | 12.40% | 10.48% | 0.72% |
| Independent Bank | 19.93% | 15.26% | 1.24% |
Analyst Recommendations
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Franklin Financial Services | 0 | 0 | 0 | 0 | 0.00 |
| Independent Bank | 0 | 4 | 0 | 0 | 2.00 |
Independent Bank has a consensus target price of $32.17, suggesting a potential downside of 15.17%. Given Independent Bank’s stronger consensus rating and higher probable upside, analysts clearly believe Independent Bank is more favorable than Franklin Financial Services.
Valuation and Earnings
This table compares Franklin Financial Services and Independent Bank”s revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Franklin Financial Services | $91.61 million | 1.58 | $13.60 million | $3.17 | 10.38 |
| Independent Bank | $203.04 million | 3.90 | $59.07 million | $2.94 | 12.90 |
Independent Bank has higher revenue and earnings than Franklin Financial Services. Franklin Financial Services is trading at a lower price-to-earnings ratio than Independent Bank, indicating that it is currently the more affordable of the two stocks.
Institutional and Insider Ownership
24.8% of Franklin Financial Services shares are held by institutional investors. Comparatively, 79.4% of Independent Bank shares are held by institutional investors. 6.9% of Franklin Financial Services shares are held by insiders. Comparatively, 5.5% of Independent Bank shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.
Dividends
Franklin Financial Services pays an annual dividend of $1.28 per share and has a dividend yield of 3.9%. Independent Bank pays an annual dividend of $0.96 per share and has a dividend yield of 2.5%. Franklin Financial Services pays out 40.4% of its earnings in the form of a dividend. Independent Bank pays out 32.7% 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.
Summary
Independent Bank beats Franklin Financial Services on 12 of the 15 factors compared between the two stocks.
About Franklin Financial Services
Franklin Financial Services Corporation operates as the bank holding company for Farmers and Merchants Trust Company of Chambersburg that provides commercial, retail banking, and trust services to businesses, individuals, governmental entities, and non-profit organizations in Pennsylvania. It offers various deposit products, including checking, savings, money management, and time deposit accounts, as well as demand deposits. The company also provides commercial real estate, construction and land development, commercial and industrial, and residential mortgage loans, as well as installment and revolving loans; consumer loans comprising unsecured personal lines of credit and installment loans; and secured and unsecured commercial and industrial loans, including accounts receivable and inventory financing, and commercial equipment financing. In addition, it offers various investment and trust services comprising estate planning and administration, corporate and personal trust fund management, pension, and profit sharing and other employee benefit funds management services, and custodial services, as well as non-trust related investment services; sells mutual funds, annuities, and insurance products; and offers safe deposit, pension, and fiduciary services. Further, the company engages in non-bank investment activities, such as venture capital investments. The company was founded in 1906 and is headquartered in Chambersburg, Pennsylvania.
About Independent Bank
Independent Bank Corporation operates as the bank holding company for Independent Bank that provides commercial banking services to individuals and businesses in rural and suburban communities in Michigan. It offers checking and savings accounts, commercial lending, direct and indirect consumer financing, mortgage lending, and safe deposit box services. The company also provides title insurance services and investment services, as well as automatic teller machines, and internet and mobile banking services. In addition, it operates through branches, drive-thru facilities, and loan production offices. Independent Bank Corporation was founded in 1864 and is based in Grand Rapids, Michigan.
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