Financial Survey: Commerce Bancshares (NASDAQ:CBSH) and First Merchants (NASDAQ:FRME)

Commerce Bancshares (NASDAQ:CBSH) and First Merchants (NASDAQ:FRME) are both mid-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their institutional ownership, earnings, risk, profitability, analyst recommendations, valuation and dividends.

Risk and Volatility

Commerce Bancshares has a beta of 0.59, meaning that its share price is 41% less volatile than the S&P 500. Comparatively, First Merchants has a beta of 1.05, meaning that its share price is 5% more volatile than the S&P 500.

Dividends

Commerce Bancshares pays an annual dividend of $1.10 per share and has a dividend yield of 2.1%. First Merchants pays an annual dividend of $1.44 per share and has a dividend yield of 4.1%. Commerce Bancshares pays out 26.3% of its earnings in the form of a dividend. First Merchants pays out 36.0% 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 First Merchants has raised its dividend for 13 consecutive years.

Earnings & Valuation

This table compares Commerce Bancshares and First Merchants”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Commerce Bancshares	$1.74 billion	4.04	$526.33 million	$4.19	12.56
First Merchants	$647.91 million	3.16	$201.40 million	$4.00	8.87

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

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Commerce Bancshares and First Merchants, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Commerce Bancshares	1	9	1	0	2.00
First Merchants	0	3	3	1	2.71

Commerce Bancshares currently has a consensus price target of $65.29, suggesting a potential upside of 24.05%. First Merchants has a consensus price target of $47.60, suggesting a potential upside of 34.16%. Given First Merchants’ stronger consensus rating and higher possible upside, analysts clearly believe First Merchants is more favorable than Commerce Bancshares.

Insider & Institutional Ownership

70.3% of Commerce Bancshares shares are owned by institutional investors. Comparatively, 73.9% of First Merchants shares are owned by institutional investors. 3.1% of Commerce Bancshares shares are owned by insiders. Comparatively, 1.4% of First Merchants shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Commerce Bancshares and First Merchants’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Commerce Bancshares	26.48%	15.73%	1.74%
First Merchants	22.04%	9.91%	1.24%

Summary

Commerce Bancshares beats First Merchants on 11 of the 18 factors compared between the two stocks.

About Commerce Bancshares

Commerce Bancshares, Inc. operates as the bank holding company for Commerce Bank that provides retail, mortgage banking, corporate, investment, trust, and asset management products and services to individuals and businesses in the United States. It operates through three segments: Consumer, Commercial, and Wealth. The Consumer segment offers various banking products and services, including consumer deposits; consumer loans, such as automobile, motorcycle, marine, tractor/trailer, recreational vehicle, fixed rate and revolving home equity, and other consumer loans; patient health care financing; real estate loans; indirect and other consumer financing; retail branch network; personal mortgage banking; consumer installment lending; and consumer debit and credit bank cards. The Commercial segment provides corporate lending, leasing, international, merchant and commercial bank card, and securities safekeeping and bond accounting services; and business products, government deposits, and related commercial cash management services, as well as sells fixed income securities to correspondent banks, corporations, public institutions, municipalities, and individuals. The Wealth segment provides traditional trust and estate planning, advisory and discretionary investment portfolio management, and brokerage services, as well as private banking accounts. The company also offers private equity investment, securities brokerage, insurance agency, specialty lending, and leasing services, as well as online and mobile banking services. Commerce Bancshares, Inc. was founded in 1865 and is headquartered in Kansas City, 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.