Critical Contrast: Regions Financial (NYSE:RF) versus Farmers & Merchants Bancorp (OTCMKTS:FMCB)

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

Valuation and Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Farmers & Merchants Bancorp	$268.67 million	2.61	$88.31 million	$118.46	8.44
Regions Financial	$9.15 billion	2.59	$2.07 billion	$1.77	14.75

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

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Farmers & Merchants Bancorp and Regions Financial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Farmers & Merchants Bancorp	0	0	0	0	0.00
Regions Financial	1	5	11	0	2.59

Regions Financial has a consensus target price of $25.94, indicating a potential downside of 0.61%. Given Regions Financial’s stronger consensus rating and higher possible upside, analysts clearly believe Regions Financial is more favorable than Farmers & Merchants Bancorp.

Dividends

Farmers & Merchants Bancorp pays an annual dividend of $17.60 per share and has a dividend yield of 1.8%. Regions Financial pays an annual dividend of $1.00 per share and has a dividend yield of 3.8%. Farmers & Merchants Bancorp pays out 14.9% of its earnings in the form of a dividend. Regions Financial pays out 56.5% 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. Regions Financial has raised its dividend for 12 consecutive years. Regions Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Farmers & Merchants Bancorp	30.25%	15.35%	1.62%
Regions Financial	18.78%	12.60%	1.30%

Volatility & Risk

Farmers & Merchants Bancorp has a beta of 0.01, meaning that its share price is 99% less volatile than the S&P 500. Comparatively, Regions Financial has a beta of 1.16, meaning that its share price is 16% more volatile than the S&P 500.

Institutional & Insider Ownership

5.6% of Farmers & Merchants Bancorp shares are owned by institutional investors. Comparatively, 79.4% of Regions Financial shares are owned by institutional investors. 8.0% of Farmers & Merchants Bancorp shares are owned by insiders. Comparatively, 0.3% of Regions Financial shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

Regions Financial beats Farmers & Merchants Bancorp on 10 of the 17 factors compared between the two stocks.

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.

About Regions Financial

Regions Financial Corporation, a financial holding company, provides banking and bank-related services to individual and corporate customers. It operates through three segments: Corporate Bank, Consumer Bank, and Wealth Management. The Corporate Bank segment offers commercial banking services, such as commercial and industrial, commercial real estate, and investor real estate lending; equipment lease financing; deposit products; and securities underwriting and placement, loan syndication and placement, foreign exchange, derivatives, merger and acquisition, and other advisory services. It serves corporate, middle market, and commercial real estate developers and investors. The Consumer Bank segment provides consumer banking products and services related to residential first mortgages, home equity lines and loans, consumer credit cards, and other consumer loans, as well as deposits. The Wealth Management segment offers credit related products, and retirement and savings solutions; and trust and investment management, asset management, and estate planning services to individuals, businesses, governmental institutions, and non-profit entities. It also provides investment and insurance products; low-income housing tax credit corporate fund syndication services; and other specialty financing services. The company was founded in 1971 and is headquartered in Birmingham, Alabama.