Comparing Westamerica Bancorporation (NASDAQ:WABC) and First Merchants (NASDAQ:FRME)

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

Dividends

First Merchants pays an annual dividend of $1.40 per share and has a dividend yield of 3.8%. Westamerica Bancorporation pays an annual dividend of $1.76 per share and has a dividend yield of 3.6%. First Merchants pays out 40.3% of its earnings in the form of a dividend. Westamerica Bancorporation pays out 29.7% 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 raised its dividend for 13 consecutive years and Westamerica Bancorporation has raised its dividend for 32 consecutive years.

Insider & Institutional Ownership

73.9% of First Merchants shares are held by institutional investors. Comparatively, 81.9% of Westamerica Bancorporation shares are held by institutional investors. 1.3% of First Merchants shares are held by insiders. Comparatively, 4.4% of Westamerica Bancorporation 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.

Risk & Volatility

First Merchants has a beta of 1.02, indicating that its share price is 2% more volatile than the S&P 500. Comparatively, Westamerica Bancorporation has a beta of 0.55, indicating that its share price is 45% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for First Merchants and Westamerica Bancorporation, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
First Merchants	0	2	3	0	2.60
Westamerica Bancorporation	0	3	0	0	2.00

First Merchants currently has a consensus target price of $42.20, indicating a potential upside of 14.71%. Westamerica Bancorporation has a consensus target price of $57.00, indicating a potential upside of 16.47%. Given Westamerica Bancorporation’s higher probable upside, analysts clearly believe Westamerica Bancorporation is more favorable than First Merchants.

Profitability

This table compares First Merchants and Westamerica Bancorporation’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
First Merchants	17.77%	9.17%	1.09%
Westamerica Bancorporation	47.12%	20.17%	2.38%

Valuation and Earnings

This table compares First Merchants and Westamerica Bancorporation”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
First Merchants	$631.34 million	3.41	$223.79 million	$3.47	10.60
Westamerica Bancorporation	$327.54 million	3.99	$161.77 million	$5.92	8.27

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

Summary

Westamerica Bancorporation beats First Merchants on 10 of the 17 factors compared between the two stocks.

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.

About Westamerica Bancorporation

Westamerica Bancorporation operates as a bank holding company for the Westamerica Bank that provides various banking products and services to individual and commercial customers. The company accepts various deposit products, including retail savings and checking accounts, as well as certificates of deposit. Its loan portfolio includes commercial, commercial and residential real estate, real estate construction, and consumer installment loans, as well as indirect automobile loans. The company was formerly known as Independent Bankshares Corporation and changed its name to Westamerica Bancorporation in 1983. The company was founded in 1884 and is headquartered in San Rafael, California.