Analyzing Farmers & Merchants Bancorp (NASDAQ:FMAO) & Finward Bancorp (NASDAQ:FNWD)

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

Dividends

Finward Bancorp pays an annual dividend of $0.48 per share and has a dividend yield of 1.5%. Farmers & Merchants Bancorp pays an annual dividend of $0.88 per share and has a dividend yield of 2.7%. Finward Bancorp pays out 17.8% of its earnings in the form of a dividend. Farmers & Merchants Bancorp pays out 51.8% 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. Farmers & Merchants Bancorp has raised its dividend for 15 consecutive years. Farmers & Merchants Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Finward Bancorp and Farmers & Merchants Bancorp”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Finward Bancorp	$96.53 million	1.39	$8.38 million	$2.69	11.54
Farmers & Merchants Bancorp	$155.85 million	2.82	$22.79 million	$1.70	18.88

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Finward Bancorp	10.44%	7.73%	0.55%
Farmers & Merchants Bancorp	13.16%	7.25%	0.70%

Insider and Institutional Ownership

26.6% of Finward Bancorp shares are owned by institutional investors. Comparatively, 24.0% of Farmers & Merchants Bancorp shares are owned by institutional investors. 13.7% of Finward Bancorp shares are owned by company insiders. Comparatively, 7.9% of Farmers & Merchants Bancorp shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Finward Bancorp and Farmers & Merchants Bancorp, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Finward Bancorp	0	0	1	0	3.00
Farmers & Merchants Bancorp	0	2	0	0	2.00

Finward Bancorp presently has a consensus price target of $31.00, indicating a potential downside of 0.16%. Farmers & Merchants Bancorp has a consensus price target of $24.00, indicating a potential downside of 25.21%. Given Finward Bancorp’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Finward Bancorp is more favorable than Farmers & Merchants Bancorp.

Volatility & Risk

Finward Bancorp has a beta of 0.53, indicating that its stock price is 47% less volatile than the S&P 500. Comparatively, Farmers & Merchants Bancorp has a beta of 0.63, indicating that its stock price is 37% less volatile than the S&P 500.

Summary

Farmers & Merchants Bancorp beats Finward Bancorp on 9 of the 17 factors compared between the two stocks.

About Finward Bancorp

Finward Bancorp operates as the holding company for Peoples Bank that provides various banking products and services. The company’s deposit products include non-interest- and interest-bearing demand accounts, savings accounts, money market deposit accounts, certificate accounts, and retirement savings plans. Its loan products portfolio comprises residential mortgage loans that enable borrowers to purchase existing homes, refinance existing homes, or construct new homes; construction loans primarily to individuals and contractors; commercial real estate loans; consumer loans to individuals for personal, household, or family purposes; home equity line of credit; home improvement loans and equity loans; commercial business loans; government loans; and loans to municipalities. The company also offers estate and retirement planning, custodial services, guardianships, IRA accounts, and investment agency accounts, as well as serves as the personal representative of estates, and acts as trustee for revocable and irrevocable trusts. In addition, it provides insurance and annuity investments to wealth management customers; holds real estate properties; and operates as a real estate investment trust. The company was formerly known as NorthWest Indiana Bancorp and changed its name to Finward Bancorp in May 2021. Finward Bancorp was founded in 1916 and is headquartered in Munster, Indiana.

About Farmers & Merchants Bancorp

Farmers & Merchants Bancorp, Inc. operates as the bank holding company for The Farmers & Merchants State Bank that provides commercial banking services to individuals and small businesses in Northwest Ohio and Northeast Indiana. The company offers checking, savings, and time deposit accounts; certificates of deposit; and custodial services for individual retirement and health savings accounts. It also provides commercial, agricultural, and residential mortgage, as well as consumer lending products; loans for farmland, farm equipment, and livestock; operating loans for seeds, fertilizers, and feeds; home improvement loans; and loans for autos, trucks, recreational vehicles, and motorcycles. In addition, the company offers commercial real estate loans, such as lines of credit and machinery purchase loans. Further, it provides automated teller machine or interactive teller machine services; and online and mobile banking, bill-pay, on-line statement opportunities, and remote deposit capture or electronic deposit processing. Additionally, the company offers electronic transaction origination, such as wire and automated clearing house file transmittal services. Farmers & Merchants Bancorp, Inc. was founded in 1897 and is headquartered in Archbold, Ohio.