Comparing Commerce Bancshares (NASDAQ:CBSH) & Farmers & Merchants Bancorp (NASDAQ:FMAO)

Commerce Bancshares (NASDAQ:CBSH) and Farmers & Merchants Bancorp (NASDAQ:FMAO) 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, risk and institutional ownership.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Commerce Bancshares	26.06%	14.27%	1.72%
Farmers & Merchants Bancorp	21.30%	11.25%	1.22%

Risk & Volatility

Commerce Bancshares has a beta of 0.61, suggesting that its share price is 39% less volatile than the S&P 500. Comparatively, Farmers & Merchants Bancorp has a beta of 0.76, suggesting that its share price is 24% less volatile than the S&P 500.

Analyst Recommendations

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Commerce Bancshares	0	7	3	0	2.30
Farmers & Merchants Bancorp	0	3	0	1	2.50

Commerce Bancshares currently has a consensus target price of $63.50, indicating a potential upside of 13.92%. Farmers & Merchants Bancorp has a consensus target price of $33.75, indicating a potential downside of 8.31%. Given Commerce Bancshares’ higher possible upside, research analysts clearly believe Commerce Bancshares is more favorable than Farmers & Merchants Bancorp.

Insider and Institutional Ownership

70.3% of Commerce Bancshares shares are held by institutional investors. Comparatively, 24.0% of Farmers & Merchants Bancorp shares are held by institutional investors. 1.8% of Commerce Bancshares shares are held by insiders. Comparatively, 7.3% of Farmers & Merchants Bancorp shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares Commerce Bancshares and Farmers & Merchants Bancorp”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Commerce Bancshares	$2.14 billion	3.69	$566.25 million	$4.15	13.43
Farmers & Merchants Bancorp	$129.96 million	3.90	$33.31 million	$3.11	11.84

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

Dividends

Commerce Bancshares pays an annual dividend of $1.10 per share and has a dividend yield of 2.0%. Farmers & Merchants Bancorp pays an annual dividend of $0.96 per share and has a dividend yield of 2.6%. Commerce Bancshares pays out 26.5% of its earnings in the form of a dividend. Farmers & Merchants Bancorp pays out 30.9% 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. Commerce Bancshares has raised its dividend for 58 consecutive years and Farmers & Merchants Bancorp has raised its dividend for 19 consecutive years.

Summary

Commerce Bancshares beats Farmers & Merchants Bancorp on 12 of the 18 factors compared between the two stocks.

About Commerce Bancshares

Commerce Bancshares, Inc. is a bank holding company headquartered in Kansas City, Missouri. Founded in 1865, it provides banking and financial services through its principal subsidiary, Commerce Bank. The company serves consumers, businesses, institutions and public-sector organizations. Its services include checking and savings accounts, lending, mortgage banking, treasury management, payment processing, and wealth management and trust services. Commerce Bank operates across several Midwestern and neighboring states, including Missouri, Kansas, Illinois, Oklahoma and Colorado.

About Farmers & Merchants Bancorp

Farmers & Merchants Bancorp, Inc. is a bank holding company whose primary subsidiary, The Farmers & Merchants State Bank, provides banking services to individuals, businesses and agricultural customers. Its offerings include deposit accounts, commercial and consumer lending, mortgages and other financial services. Founded in 1897, the company is headquartered in Archbold, Ohio, and serves communities in northwest Ohio and northeast Indiana through its banking locations and digital channels.