Civista Bancshares (NASDAQ:CIVB) versus First Merchants (NASDAQ:FRME) Critical Analysis

First Merchants (NASDAQ:FRME) and Civista Bancshares (NASDAQ:CIVB) are both finance companies, but which is the better business? We will compare the two businesses based on the strength of their profitability, risk, dividends, institutional ownership, analyst recommendations, earnings and valuation.

Analyst Recommendations

This is a breakdown of current ratings and target prices for First Merchants and Civista Bancshares, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First Merchants	0	1	4	0	2.80
Civista Bancshares	0	2	2	0	2.50

First Merchants currently has a consensus target price of $46.40, indicating a potential upside of 25.10%. Civista Bancshares has a consensus target price of $25.20, indicating a potential upside of 12.45%. Given First Merchants’ stronger consensus rating and higher possible upside, equities analysts clearly believe First Merchants is more favorable than Civista Bancshares.

Institutional and Insider Ownership

73.9% of First Merchants shares are owned by institutional investors. Comparatively, 52.1% of Civista Bancshares shares are owned by institutional investors. 1.4% of First Merchants shares are owned by insiders. Comparatively, 2.6% of Civista Bancshares shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Volatility & Risk

First Merchants has a beta of 1.03, meaning that its stock price is 3% more volatile than the S&P 500. Comparatively, Civista Bancshares has a beta of 0.69, meaning that its stock price is 31% less volatile than the S&P 500.

Profitability

This table compares First Merchants and Civista Bancshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First Merchants	19.63%	9.28%	1.14%
Civista Bancshares	14.35%	9.13%	0.87%

Dividends

First Merchants pays an annual dividend of $1.44 per share and has a dividend yield of 3.9%. Civista Bancshares pays an annual dividend of $0.68 per share and has a dividend yield of 3.0%. First Merchants pays out 40.4% of its earnings in the form of a dividend. Civista Bancshares pays out 30.0% 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. First Merchants has raised its dividend for 13 consecutive years and Civista Bancshares has raised its dividend for 4 consecutive years. First Merchants is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares First Merchants and Civista Bancshares”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First Merchants	$1.07 billion	2.01	$201.40 million	$3.56	10.42
Civista Bancshares	$244.44 million	1.42	$31.68 million	$2.27	9.87

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

Summary

First Merchants beats Civista Bancshares on 15 of the 17 factors compared between the two stocks.

About First Merchants

First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides community banking services. The company offers a range of financial services, including time, savings, and demand deposits; and consumer, commercial, agri-business, public finance, and real estate mortgage loans. It also provides personal and corporate trust; brokerage and private wealth management; and letters of credit, repurchase agreements, and other corporate services. The company operates banking locations in Indiana, Illinois, Ohio, and Michigan counties. It also offers its services through electronic and mobile delivery channels. First Merchants Corporation was founded in 1893 and is headquartered in Muncie, Indiana.

About Civista Bancshares

Civista Bancshares, Inc. operates as the financial holding company for Civista Bank that provides community banking services. It collects a range of customer deposits; and offers commercial and agriculture, commercial and residential real estate, farm real estate, real estate construction, consumer, and other loans, as well as letters of credit. The company also holds and manages securities portfolio; leases general equipment; and provides captive insurance products. It operates in North Central, West Central, South Western Ohio, South Eastern Indiana, and Northern Kentucky. The company was formerly known as First Citizens Banc Corp and changed its name to Civista Bancshares, Inc. in May 2015. Civista Bancshares, Inc. was founded in 1884 and is headquartered in Sandusky, Ohio.