Critical Comparison: Heartland BancCorp (OTCMKTS:HLAN) versus Farmers & Merchants Bancorp (OTCMKTS:FMCB)

Farmers & Merchants Bancorp (OTCMKTS:FMCB) and Heartland BancCorp (OTCMKTS:HLAN) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their valuation, analyst recommendations, dividends, risk, profitability, institutional ownership and earnings.

Risk & Volatility

Farmers & Merchants Bancorp has a beta of 0.2, meaning that its stock price is 80% less volatile than the S&P 500. Comparatively, Heartland BancCorp has a beta of 0.41, meaning that its stock price is 59% less volatile than the S&P 500.

Dividends

Farmers & Merchants Bancorp pays an annual dividend of $18.60 per share and has a dividend yield of 1.7%. Heartland BancCorp pays an annual dividend of $3.03 per share and has a dividend yield of 1.9%. Farmers & Merchants Bancorp pays out 15.7% of its earnings in the form of a dividend. Heartland BancCorp pays out 31.1% 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.

Institutional & Insider Ownership

5.6% of Farmers & Merchants Bancorp shares are held by institutional investors. Comparatively, 7.5% of Heartland BancCorp shares are held by institutional investors. 8.0% of Farmers & Merchants Bancorp shares are held by company insiders. Comparatively, 22.7% of Heartland BancCorp shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Farmers & Merchants Bancorp	30.25%	15.35%	1.62%
Heartland BancCorp	17.89%	N/A	N/A

Analyst Recommendations

This is a summary of current ratings and recommmendations for Farmers & Merchants Bancorp and Heartland BancCorp, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Farmers & Merchants Bancorp	0	0	0	0	0.00
Heartland BancCorp	0	1	1	0	2.50

Heartland BancCorp has a consensus price target of $122.50, suggesting a potential downside of 24.86%. Given Heartland BancCorp’s stronger consensus rating and higher possible upside, analysts plainly believe Heartland BancCorp is more favorable than Farmers & Merchants Bancorp.

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Farmers & Merchants Bancorp	$268.67 million	2.77	$88.31 million	$118.46	8.97
Heartland BancCorp	$104.83 million	3.15	$19.52 million	$9.74	16.74

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

Summary

Heartland BancCorp beats Farmers & Merchants Bancorp on 9 of the 16 factors compared between the two stocks.

About Farmers & Merchants Bancorp

Farmers & Merchants Bancorp operates as the bank holding company for Farmers & Merchants Bank of Central California that provides various banking services to businesses and individuals. The company accepts various deposit products, including checking, savings, money market, time certificates of deposit, and individual retirement accounts. It also offers range of lending products comprising commercial and residential real estate, real estate construction, agribusiness, and consumer loans, as well as equipment leases and credit card services; commercial products, including term loans, lines of credit and other working capital financing, and letters of credit; and financing products, such as automobile financing, home improvement, and home equity lines of credit. In addition, the company provides various specialized services consisting of credit card programs for merchants, lockbox and other collection services, account reconciliation, investment sweep, online account access, and electronic funds transfers through domestic and international wire and automated clearinghouse; online banking services; and investment products, such as mutual funds and annuities. The company was founded in 1916 and is headquartered in Lodi, California.

About Heartland BancCorp

Heartland BancCorp operates as the bank holding company for Heartland Bank that provides various banking and financial services to individual and corporate customers. The company offers personal and business checking and savings accounts. It also provides various lending solutions comprising agricultural loans, commercial and business lending, home and personal loans, and title services. In addition, the company offers online banking, treasury management, credit and debit card, and mobile wallet services. Further, it provides education planning, insurance, wealth management, and retirement planning services. Heartland BancCorp was founded in 1911 and is based in Whitehall, Ohio.