First Merchants (NASDAQ:FRME) & Auburn National Bancorporation (NASDAQ:AUBN) Critical Analysis

First Merchants (NASDAQ:FRME) and Auburn National Bancorporation (NASDAQ:AUBN) are both finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, risk, profitability, institutional ownership, earnings and dividends.

Valuation and Earnings

This table compares First Merchants and Auburn National Bancorporation”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First Merchants	$1.05 billion	2.49	$226.00 million	$3.12	13.37
Auburn National Bancorporation	$43.89 million	2.11	$7.26 million	$2.41	11.02

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

Dividends

First Merchants pays an annual dividend of $1.48 per share and has a dividend yield of 3.5%. Auburn National Bancorporation pays an annual dividend of $1.08 per share and has a dividend yield of 4.1%. First Merchants pays out 47.4% of its earnings in the form of a dividend. Auburn National Bancorporation pays out 44.8% 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. Auburn National Bancorporation is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares First Merchants and Auburn National Bancorporation’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First Merchants	17.05%	8.86%	1.12%
Auburn National Bancorporation	18.60%	9.10%	0.81%

Institutional & Insider Ownership

73.9% of First Merchants shares are held by institutional investors. Comparatively, 39.5% of Auburn National Bancorporation shares are held by institutional investors. 1.8% of First Merchants shares are held by company insiders. Comparatively, 18.7% of Auburn National Bancorporation shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent recommendations for First Merchants and Auburn National Bancorporation, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First Merchants	0	3	3	0	2.50
Auburn National Bancorporation	0	1	0	0	2.00

First Merchants currently has a consensus price target of $49.00, indicating a potential upside of 17.42%. Given First Merchants’ stronger consensus rating and higher probable upside, equities analysts clearly believe First Merchants is more favorable than Auburn National Bancorporation.

Risk and Volatility

First Merchants has a beta of 0.84, meaning that its stock price is 16% less volatile than the S&P 500. Comparatively, Auburn National Bancorporation has a beta of 0.42, meaning that its stock price is 58% less volatile than the S&P 500.

Summary

First Merchants beats Auburn National Bancorporation on 12 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 Auburn National Bancorporation

Auburn National Bancorporation, Inc. operates as the bank holding company for AuburnBank that provides various banking products and services in East Alabama. The company offers checking, savings, and transaction deposit accounts, as well as certificates of deposit. It also provides commercial, financial, agricultural, real estate construction, and consumer loan products; and other financial services. In addition, the company offers automated teller services; debit cards; online banking, bill payment, and other electronic banking services; and safe deposit boxes. Auburn National Bancorporation, Inc. was founded in 1907 and is headquartered in Auburn, Alabama.