Mercantile Bank (NASDAQ:MBWM) versus Investar (NASDAQ:ISTR) Head to Head Analysis

Investar (NASDAQ:ISTR) and Mercantile Bank (NASDAQ:MBWM) are both small-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, earnings, institutional ownership, profitability, dividends, analyst recommendations and valuation.

Volatility and Risk

Investar has a beta of 0.56, indicating that its stock price is 44% less volatile than the S&P 500. Comparatively, Mercantile Bank has a beta of 0.82, indicating that its stock price is 18% less volatile than the S&P 500.

Valuation and Earnings

This table compares Investar and Mercantile Bank”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Investar	$153.48 million	2.52	$22.90 million	$2.63	10.70
Mercantile Bank	$371.80 million	2.84	$88.75 million	$5.61	10.89

Mercantile Bank has higher revenue and earnings than Investar. Investar is trading at a lower price-to-earnings ratio than Mercantile Bank, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Investar and Mercantile Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Investar	18.81%	12.30%	1.22%
Mercantile Bank	24.42%	13.37%	1.43%

Analyst Recommendations

This is a summary of recent ratings and target prices for Investar and Mercantile Bank, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Investar	0	2	1	0	2.33
Mercantile Bank	0	3	2	1	2.67

Investar currently has a consensus target price of $31.00, suggesting a potential upside of 10.12%. Mercantile Bank has a consensus target price of $62.20, suggesting a potential upside of 1.78%. Given Investar’s higher possible upside, analysts clearly believe Investar is more favorable than Mercantile Bank.

Insider & Institutional Ownership

50.2% of Investar shares are held by institutional investors. Comparatively, 58.6% of Mercantile Bank shares are held by institutional investors. 10.6% of Investar shares are held by company insiders. Comparatively, 2.5% of Mercantile Bank shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Dividends

Investar pays an annual dividend of $0.48 per share and has a dividend yield of 1.7%. Mercantile Bank pays an annual dividend of $1.60 per share and has a dividend yield of 2.6%. Investar pays out 18.3% of its earnings in the form of a dividend. Mercantile Bank pays out 28.5% 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. Investar has increased its dividend for 10 consecutive years and Mercantile Bank has increased its dividend for 14 consecutive years. Mercantile Bank is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Mercantile Bank beats Investar on 15 of the 18 factors compared between the two stocks.

About Investar

Investar Holding Corporation is a bank holding company headquartered in Baton Rouge, Louisiana. Through its subsidiary, Investar Bank, it provides commercial and consumer banking services to individuals, businesses and organizations. The bank offers deposit accounts, commercial and consumer loans, mortgage lending, and cash-management services, along with online and mobile banking. Its lending activities include commercial real estate, commercial and industrial, residential real estate and consumer loans.

About Mercantile Bank

Mercantile Bank Corporation is a Michigan-based bank holding company headquartered in Grand Rapids. Through its subsidiary, Mercantile Bank, it provides commercial and personal banking services to individuals, businesses and organizations across Michigan. The bank offers deposit accounts and lending products, including commercial, real estate, mortgage and consumer loans. Its services also include online and mobile banking and other banking solutions for businesses and individuals. Mercantile Bank traces its history to 1997, when it began operations in West Michigan.