Reviewing Prosperity Bancshares (NYSE:PB) and Farmers & Merchants Bancorp (OTCMKTS:FMCB)

Prosperity Bancshares (NYSE:PB) and Farmers & Merchants Bancorp (OTCMKTS:FMCB) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their analyst recommendations, dividends, profitability, valuation, earnings, institutional ownership and risk.

Volatility and Risk

Prosperity Bancshares has a beta of 0.68, suggesting that its share price is 32% less volatile than the S&P 500. Comparatively, Farmers & Merchants Bancorp has a beta of 0.24, suggesting that its share price is 76% less volatile than the S&P 500.

Valuation & Earnings

This table compares Prosperity Bancshares and Farmers & Merchants Bancorp”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Prosperity Bancshares	$1.17 billion	5.98	$479.39 million	$5.25	14.04
Farmers & Merchants Bancorp	$292.68 million	2.47	$88.46 million	$123.32	8.03

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

Dividends

Prosperity Bancshares pays an annual dividend of $2.32 per share and has a dividend yield of 3.1%. Farmers & Merchants Bancorp pays an annual dividend of $18.60 per share and has a dividend yield of 1.9%. Prosperity Bancshares pays out 44.2% of its earnings in the form of a dividend. Farmers & Merchants Bancorp pays out 15.1% 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. Prosperity Bancshares has raised its dividend for 27 consecutive years. Prosperity Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

80.7% of Prosperity Bancshares shares are held by institutional investors. Comparatively, 5.6% of Farmers & Merchants Bancorp shares are held by institutional investors. 4.2% of Prosperity Bancshares shares are held by insiders. Comparatively, 8.5% of Farmers & Merchants Bancorp shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Prosperity Bancshares	27.69%	6.81%	1.27%
Farmers & Merchants Bancorp	30.27%	15.08%	1.63%

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Prosperity Bancshares and Farmers & Merchants Bancorp, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Prosperity Bancshares	0	6	10	0	2.63
Farmers & Merchants Bancorp	0	0	0	0	0.00

Prosperity Bancshares currently has a consensus price target of $83.80, indicating a potential upside of 13.67%. Given Prosperity Bancshares’ stronger consensus rating and higher probable upside, equities analysts plainly believe Prosperity Bancshares is more favorable than Farmers & Merchants Bancorp.

Summary

Prosperity Bancshares beats Farmers & Merchants Bancorp on 11 of the 17 factors compared between the two stocks.

About Prosperity Bancshares

Prosperity Bancshares, Inc. operates as bank holding company for the Prosperity Bank that provides financial products and services to businesses and consumers. It accepts various deposit products, such as demand, savings, money market, and time accounts, as well as and certificates of deposit. The company also offers 1-4 family residential mortgage, commercial real estate and multifamily residential, commercial and industrial, agricultural, and non-real estate agricultural loans, as well as construction, land development, and other land loans; consumer loans, including automobile, recreational vehicle, boat, home improvement, personal, and deposit account collateralized loans; term loans and lines of credit; and consumer durables and home equity loans, as well as loans for working capital, business expansion, and purchase of equipment and machinery. In addition, it provides internet banking, mobile banking, trust and wealth management, retail brokerage, mortgage services, and treasury management, as well as debit and credit cards. The company was incorporated in 1983 and is headquartered in Houston, Texas.

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.