Head to Head Analysis: Lakeland Financial (NASDAQ:LKFN) vs. First Merchants (NASDAQ:FRME)

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Lakeland Financial	24.51%	14.19%	1.49%
First Merchants	21.49%	9.58%	1.21%

Valuation & Earnings

This table compares Lakeland Financial 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
Lakeland Financial	$268.99 million	5.63	$103.36 million	$4.01	14.95
First Merchants	$662.95 million	3.87	$226.00 million	$3.89	10.42

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

Dividends

Lakeland Financial pays an annual dividend of $2.08 per share and has a dividend yield of 3.5%. First Merchants pays an annual dividend of $1.44 per share and has a dividend yield of 3.6%. Lakeland Financial pays out 51.9% of its earnings in the form of a dividend. First Merchants pays out 37.0% 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. Lakeland Financial has increased its dividend for 14 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 lower payout ratio.

Risk and Volatility

Lakeland Financial has a beta of 0.72, indicating that its stock price is 28% less volatile than the S&P 500. Comparatively, First Merchants has a beta of 0.88, indicating that its stock price is 12% less volatile than the S&P 500.

Institutional and Insider Ownership

81.2% of Lakeland Financial shares are held by institutional investors. Comparatively, 73.9% of First Merchants shares are held by institutional investors. 3.0% of Lakeland Financial shares are held by insiders. Comparatively, 1.4% of First Merchants shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of recent ratings for Lakeland Financial and First Merchants, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Lakeland Financial	0	3	1	0	2.25
First Merchants	0	3	3	0	2.50

Lakeland Financial currently has a consensus target price of $68.00, suggesting a potential upside of 13.45%. First Merchants has a consensus target price of $48.33, suggesting a potential upside of 19.28%. Given First Merchants’ stronger consensus rating and higher probable upside, analysts clearly believe First Merchants is more favorable than Lakeland Financial.

Summary

Lakeland Financial beats First Merchants on 9 of the 17 factors compared between the two stocks.

About Lakeland Financial

Lakeland Financial Corporation operates as the bank holding company for Lake City Bank that provides various banking products and services in the United States. The company accepts various deposit products, such as noninterest bearing, interest-bearing checking, savings, money market, NOW, and demand deposits. Its loan products include commercial and industrial, commercial real estate and multi-family residential, construction, agri-business and agricultural, consumer 1-4 family mortgage, and other commercial and consumer loans. The company also provides retail and merchant credit card services; corporate treasury management, wealth advisory, and trust services; retail brokerage services, including various financial and investment products, such as annuities and life insurance; and mobile business banking and on-line treasury management services. It serves commercial real estate, manufacturing, agriculture, construction, retail, wholesale, finance and insurance, accommodation and food services, and health care industries. The company was founded in 1872 and is headquartered in Warsaw, Indiana.

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.