Head-To-Head Review: Enterprise Financial Services (NASDAQ:EFSC) and First Merchants (NASDAQ:FRME)

Enterprise Financial Services (NASDAQ:EFSC) and First Merchants (NASDAQ:FRME) are both mid-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their dividends, profitability, analyst recommendations, institutional ownership, earnings, risk and valuation.

Profitability

This table compares Enterprise Financial Services and First Merchants’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Enterprise Financial Services	21.28%	11.19%	1.29%
First Merchants	21.35%	9.88%	1.23%

Volatility and Risk

Enterprise Financial Services has a beta of 0.92, suggesting that its stock price is 8% less volatile than the S&P 500. Comparatively, First Merchants has a beta of 1.1, suggesting that its stock price is 10% more volatile than the S&P 500.

Valuation & Earnings

This table compares Enterprise Financial Services and First Merchants”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Enterprise Financial Services	$920.75 million	2.43	$185.27 million	$5.27	11.49
First Merchants	$1.07 billion	2.15	$201.40 million	$3.86	10.37

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

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Enterprise Financial Services and First Merchants, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Enterprise Financial Services	0	0	3	0	3.00
First Merchants	0	0	4	0	3.00

Enterprise Financial Services currently has a consensus target price of $64.33, suggesting a potential upside of 6.28%. First Merchants has a consensus target price of $48.25, suggesting a potential upside of 20.53%. Given First Merchants’ higher possible upside, analysts clearly believe First Merchants is more favorable than Enterprise Financial Services.

Insider & Institutional Ownership

72.2% of Enterprise Financial Services shares are owned by institutional investors. Comparatively, 73.9% of First Merchants shares are owned by institutional investors. 2.3% of Enterprise Financial Services shares are owned by company insiders. Comparatively, 1.4% of First Merchants shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

Enterprise Financial Services pays an annual dividend of $1.20 per share and has a dividend yield of 2.0%. First Merchants pays an annual dividend of $1.44 per share and has a dividend yield of 3.6%. Enterprise Financial Services pays out 22.8% of its earnings in the form of a dividend. First Merchants pays out 37.3% 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. Enterprise Financial Services has increased its dividend for 11 consecutive years and First Merchants has increased its dividend for 13 consecutive years. First Merchants is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

First Merchants beats Enterprise Financial Services on 9 of the 16 factors compared between the two stocks.

About Enterprise Financial Services

Enterprise Financial Services Corp operates as the holding company for Enterprise Bank & Trust that offers banking and wealth management services to individuals and corporate customers primarily in Arizona, California, Florida, Kansas, Missouri, Nevada, and New Mexico. It provides checking, savings, money market accounts, and certificates of deposit. The company also provides commercial and industrial, commercial real estate, real estate construction and development, residential real estate, small business administration, agricultural, consumer, and other loan products. In addition, it offers treasury management and international trade services; tax credit brokerage services; life insurance premium and sponsor finance; tax credit related lending; other deposit accounts, such as community associations, property management, third party escrow, and trust services; treasury management product and services; customized solutions and products; cash management; fiduciary, investment management, and financial advisory services; and customer hedging products, including international banking, card services, and tax credit businesses. Further, the company provides online, device applications, text, and voice banking; remote deposit capture; internet banking, mobile banking, cash management, positive pay services, fraud detection and prevention, automated payables, check image, and statement and document imaging; and controlled disbursements, repurchase agreements, and sweep investment accounts. Enterprise Financial Services Corp was founded in 1988 and is headquartered in Clayton, Missouri.

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.