Head to Head Analysis: Ames National (NASDAQ:ATLO) versus First Merchants (NASDAQ:FRME)

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

Dividends

Ames National pays an annual dividend of $0.80 per share and has a dividend yield of 3.9%. First Merchants pays an annual dividend of $1.44 per share and has a dividend yield of 3.6%. Ames National pays out 51.9% 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. First Merchants has increased its dividend for 13 consecutive years.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Ames National and First Merchants, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ames National	0	0	0	0	0.00
First Merchants	0	0	4	0	3.00

First Merchants has a consensus target price of $48.25, suggesting a potential upside of 21.02%. Given First Merchants’ stronger consensus rating and higher possible upside, analysts clearly believe First Merchants is more favorable than Ames National.

Risk and Volatility

Ames National has a beta of 0.49, suggesting that its share price is 51% less volatile than the S&P 500. Comparatively, First Merchants has a beta of 1.1, suggesting that its share price is 10% more volatile than the S&P 500.

Institutional & Insider Ownership

26.5% of Ames National shares are owned by institutional investors. Comparatively, 73.9% of First Merchants shares are owned by institutional investors. 2.1% of Ames National shares are owned by insiders. Comparatively, 1.4% of First Merchants shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Ames National	14.44%	7.46%	0.64%
First Merchants	21.35%	9.88%	1.23%

Valuation and Earnings

This table compares Ames National and First Merchants”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ames National	$92.44 million	1.98	$10.22 million	$1.54	13.38
First Merchants	$1.07 billion	2.14	$201.40 million	$3.86	10.33

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

Summary

First Merchants beats Ames National on 14 of the 17 factors compared between the two stocks.

About Ames National

Ames National Corporation operates as a multi-bank holding company that provides banking products and services primarily in Boone, Clarke, Hancock, Marshall, Polk, Story, and Union counties in central, north central, and south-central Iowa. The company accepts various deposit products, including checking and savings accounts; and time deposits, such as money market accounts and certificates of deposit. It also provides loans, such as short-term and medium-term commercial and agricultural real estate, residential real estate loans, equipment, vehicle, and home improvement loans; consumer loans to finance consumer purchases, such as automobiles, trucks, recreational vehicles, household furnishings, boats, personal loans, and lines of credit; agricultural and business operating loans and lines of credit; and originates mortgage loans for sale into the secondary market. In addition, the company offers cash management, merchant credit card processing, safe deposit box, wire transfer, direct deposit, and automated/video teller machine access services; and automatic drafts for various accounts, as well as wealth management services. Further, it provides farm management, investment, and custodial services for individuals, businesses, and non-profit organizations; and online, mobile, and private banking services. Ames National Corporation was incorporated in 1903 and is headquartered in Ames, Iowa.

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.