Critical Contrast: Farmers & Merchants Bancorp (OTCMKTS:FMCB) & Sandy Spring Bancorp (NASDAQ:SASR)

Sandy Spring Bancorp (NASDAQ:SASR) and Farmers & Merchants Bancorp (OTCMKTS:FMCB) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their dividends, earnings, institutional ownership, analyst recommendations, risk, valuation and profitability.

Institutional and Insider Ownership

66.9% of Sandy Spring Bancorp shares are held by institutional investors. Comparatively, 5.6% of Farmers & Merchants Bancorp shares are held by institutional investors. 3.4% of Sandy Spring Bancorp shares are held by company insiders. Comparatively, 8.0% of Farmers & Merchants Bancorp shares are held by company 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 Ratings

This is a summary of recent ratings and recommmendations for Sandy Spring Bancorp and Farmers & Merchants Bancorp, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sandy Spring Bancorp	0	4	0	0	2.00
Farmers & Merchants Bancorp	0	0	0	0	0.00

Sandy Spring Bancorp currently has a consensus price target of $28.25, indicating a potential downside of 10.01%. Given Sandy Spring Bancorp’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Sandy Spring Bancorp is more favorable than Farmers & Merchants Bancorp.

Earnings & Valuation

This table compares Sandy Spring Bancorp and Farmers & Merchants Bancorp”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sandy Spring Bancorp	$404.22 million	3.51	$19.93 million	$0.45	69.76
Farmers & Merchants Bancorp	$292.68 million	2.44	$88.46 million	$121.02	8.44

Farmers & Merchants Bancorp has lower revenue, but higher earnings than Sandy Spring Bancorp. Farmers & Merchants Bancorp is trading at a lower price-to-earnings ratio than Sandy Spring Bancorp, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Sandy Spring Bancorp and Farmers & Merchants Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Sandy Spring Bancorp	2.65%	5.31%	0.61%
Farmers & Merchants Bancorp	30.22%	15.22%	1.62%

Risk & Volatility

Sandy Spring Bancorp has a beta of 0.97, indicating that its share price is 3% less volatile than the S&P 500. Comparatively, Farmers & Merchants Bancorp has a beta of 0.22, indicating that its share price is 78% less volatile than the S&P 500.

Dividends

Sandy Spring Bancorp pays an annual dividend of $1.36 per share and has a dividend yield of 4.3%. Farmers & Merchants Bancorp pays an annual dividend of $18.60 per share and has a dividend yield of 1.8%. Sandy Spring Bancorp pays out 302.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Farmers & Merchants Bancorp pays out 15.4% of its earnings in the form of a dividend.

Summary

Sandy Spring Bancorp beats Farmers & Merchants Bancorp on 8 of the 15 factors compared between the two stocks.

About Sandy Spring Bancorp

Sandy Spring Bancorp, Inc. operates as the bank holding company for Sandy Spring Bank that provides commercial and retail banking, mortgage, private banking, and trust services to individuals and businesses in the United States. It offers financial products and services, including various loan and deposit products. Its loan products include commercial real estate loans, construction loans, and business loans; residential real estate loans; and consumer loans comprising home equity loans and lines, installment loans, and personal lines of credit. The company provides investment management, financial planning, and wealth management services. Sandy Spring Bancorp, Inc. was founded in 1868 and is headquartered in Olney, Maryland.

About Farmers & Merchants Bancorp

Farmers & Merchants Bancorp operates as the bank holding company for Farmers & Merchants Bank of Central California that provides various banking services to businesses and individuals. The company accepts various deposit products, including checking, savings, money market, time certificates of deposit, and individual retirement accounts. It also offers range of lending products comprising commercial and residential real estate, real estate construction, agribusiness, and consumer loans, as well as equipment leases and credit card services; commercial products, including term loans, lines of credit and other working capital financing, and letters of credit; and financing products, such as automobile financing, home improvement, and home equity lines of credit. In addition, the company provides various specialized services consisting of credit card programs for merchants, lockbox and other collection services, account reconciliation, investment sweep, online account access, and electronic funds transfers through domestic and international wire and automated clearinghouse; online banking services; and investment products, such as mutual funds and annuities. The company was founded in 1916 and is headquartered in Lodi, California.