Critical Analysis: Prime Meridian (OTCMKTS:PMHG) & First Community Bancshares (NASDAQ:FCBC)

Prime Meridian (OTCMKTS:PMHG) and First Community Bancshares (NASDAQ:FCBC) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, risk, profitability, institutional ownership, earnings and dividends.

Valuation & Earnings

This table compares Prime Meridian and First Community Bancshares”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Prime Meridian	$50.36 million	3.92	$8.49 million	$2.48	23.39
First Community Bancshares	$185.42 million	4.42	$48.79 million	$2.66	16.17

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

Dividends

Prime Meridian pays an annual dividend of $1.00 per share and has a dividend yield of 1.7%. First Community Bancshares pays an annual dividend of $1.24 per share and has a dividend yield of 2.9%. Prime Meridian pays out 40.3% of its earnings in the form of a dividend. First Community Bancshares pays out 46.6% 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 Community Bancshares has raised its dividend for 13 consecutive years. First Community Bancshares is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Prime Meridian and First Community Bancshares’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Prime Meridian	15.49%	9.13%	0.87%
First Community Bancshares	26.32%	10.17%	1.59%

Institutional & Insider Ownership

11.8% of Prime Meridian shares are held by institutional investors. Comparatively, 35.0% of First Community Bancshares shares are held by institutional investors. 25.9% of Prime Meridian shares are held by company insiders. Comparatively, 3.7% of First Community Bancshares shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent recommendations for Prime Meridian and First Community Bancshares, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Prime Meridian	0	0	0	0	0.00
First Community Bancshares	0	0	1	0	3.00

Risk and Volatility

Prime Meridian has a beta of 0.06, meaning that its stock price is 94% less volatile than the S&P 500. Comparatively, First Community Bancshares has a beta of 0.48, meaning that its stock price is 52% less volatile than the S&P 500.

Summary

First Community Bancshares beats Prime Meridian on 13 of the 16 factors compared between the two stocks.

About Prime Meridian

Prime Meridian Holding Company operates as the bank holding company for Prime Meridian Bank that provides various consumer and commercial banking services to individuals and businesses. The company accepts various deposits, such as checking, money market, savings, term certificate of deposit, demand interest-bearing and noninterest-bearing, health savings, NOW, and escrow accounts, as well as retirement savings plans and time deposits. Its loan products include commercial real estate, residential real estate and home equity, small business administration, construction, equipment, and commercial loans; and consumer and other loans comprising financing of automobiles, boats, and recreational vehicles, as well as issues standby letters and business lines of credit. The company also offers debit and credit cards; mobile banking, remote and mobile deposit, Apple Pay, bank-to-bank transfer, and online banking services; and safe deposit, wire transfer, foreign exchange, direct deposits, notary, night depository, official checks, domestic collections, bank drafts, automated teller services, drive-in tellers, merchant card, and banking by mail services, as well as invests in securities. Prime Meridian Holding Company was founded in 2008 and is headquartered in Tallahassee, Florida.

About First Community Bancshares

First Community Bankshares, Inc. operates as the financial holding company for First Community Bank that provides various banking products and services. It offers demand deposit accounts, savings and money market accounts, certificates of deposit, and individual retirement plans; and commercial, consumer real estate, and consumer and other loans. The company also provides trust management, estate administration, and investment advisory services; and investment management services. It serves individuals and businesses across various industries, such as education, government, and health services; coal mining and gas extraction; retail trade; construction; manufacturing; tourism; and transportation. The company operates through branches in West Virginia, Virginia, North Carolina, and Tennessee. Community Bankshares, Inc. was founded in 1874 and is headquartered in Bluefield, Virginia.