Critical Analysis: First Merchants (NASDAQ:FRME) and Community Bancorp (OTCMKTS:CMTV)

Community Bancorp (OTCMKTS:CMTV – Get Rating) and First Merchants (NASDAQ:FRME – Get Rating) are both small-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their profitability, institutional ownership, earnings, analyst recommendations, risk, dividends and valuation.

Valuation and Earnings

This table compares Community Bancorp and First Merchants’ revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Community Bancorp	$43.76 million	2.25	$13.74 million	N/A	N/A
First Merchants	$712.95 million	2.25	$222.09 million	$3.97	6.77

First Merchants has higher revenue and earnings than Community Bancorp.

Dividends

Community Bancorp pays an annual dividend of $0.92 per share and has a dividend yield of 5.1%. First Merchants pays an annual dividend of $1.28 per share and has a dividend yield of 4.8%. First Merchants pays out 32.2% of its earnings in the form of a dividend. First Merchants has raised its dividend for 12 consecutive years.

Analyst Ratings

This is a summary of current ratings and target prices for Community Bancorp and First Merchants, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Community Bancorp	0	0	0	0	N/A
First Merchants	0	0	2	0	3.00

First Merchants has a consensus target price of $44.67, suggesting a potential upside of 66.11%. Given First Merchants’ higher possible upside, analysts plainly believe First Merchants is more favorable than Community Bancorp.

Risk & Volatility

Community Bancorp has a beta of 0.25, meaning that its stock price is 75% less volatile than the S&P 500. Comparatively, First Merchants has a beta of 1.05, meaning that its stock price is 5% more volatile than the S&P 500.

Institutional & Insider Ownership

71.4% of First Merchants shares are owned by institutional investors. 8.8% of Community Bancorp shares are owned by company insiders. Comparatively, 1.3% of First Merchants shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Community Bancorp and First Merchants’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Community Bancorp	31.66%	20.07%	1.43%
First Merchants	29.37%	13.18%	1.46%

Summary

First Merchants beats Community Bancorp on 9 of the 14 factors compared between the two stocks.

About Community Bancorp

(Get Rating)

Community Bancorp operates as a bank holding company, which engages in a full line of personal and business financial services. It provides retail banking services to the residents, businesses, and municipalities in northeastern and central Vermont. It operates through the following segments: Commercial and Industrial, Purchased Loans, Commercial Real Estate, Municipal, Residential Real Estate, and Consumer. The Commercial and Industrial segment includes commercial and industrial loans and to a lesser extent loans to finance agricultural production. The Purchased Loans segment offers commercial loans to medical professionals nationwide and sells them individually to a secondary market, primarily banks, through a bid process. The Commercial Real Estate segment is involved in farm loans secured by farmland and buildings. The Municipal segment offers municipal financing transactions and backed by the full faith and credit of town governments or dedicated governmental revenue sources, with no historical losses recognized by the company. The Consumer segment is made for individuals for consumer and household purposes. The company was founded in 1982 and is headquartered in Derby, VT.

About First Merchants

(Get Rating)

First Merchants Corp. (Indiana) is a bank holding company, which engages in the provision of financial services. It also offers personal banking, business banking, mortgage lending, treasury management services, and wealth management. The company was founded in September 1982 and is headquartered in Muncie, IN.