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

Institutional & Insider Ownership

22.4% of Capital Bancorp shares are held by institutional investors. Comparatively, 71.0% of First Merchants shares are held by institutional investors. 39.4% of Capital Bancorp shares are held by company insiders. Comparatively, 1.3% of First Merchants shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Risk & Volatility

Capital Bancorp has a beta of 0.66, suggesting that its share price is 34% less volatile than the S&P 500. Comparatively, First Merchants has a beta of 1.08, suggesting that its share price is 8% more volatile than the S&P 500.

Profitability

This table compares Capital Bancorp and First Merchants’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Capital Bancorp 15.66% 13.72% 1.38%
First Merchants 29.79% 10.60% 1.50%

Analyst Recommendations

This is a breakdown of recent ratings for Capital Bancorp and First Merchants, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capital Bancorp 0 0 0 0 N/A
First Merchants 0 1 3 0 2.75

First Merchants has a consensus target price of $42.75, indicating a potential upside of 3.14%. Given First Merchants’ higher possible upside, analysts clearly believe First Merchants is more favorable than Capital Bancorp.

Earnings and Valuation

This table compares Capital Bancorp and First Merchants’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Capital Bancorp $107.87 million 1.84 $16.90 million $1.21 11.87
First Merchants $552.09 million 4.18 $164.46 million $3.46 11.98

First Merchants has higher revenue and earnings than Capital Bancorp. Capital Bancorp 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

First Merchants beats Capital Bancorp on 11 of the 13 factors compared between the two stocks.

About Capital Bancorp

Capital Bancorp, Inc. operates as the bank holding company for Capital Bank, N.A. that provides various commercial banking products and services to businesses, not-for-profit associations, and entrepreneurs in the United States. The company offers a range of deposit products and services, including various checking and savings accounts, certificates of deposit, money market accounts, debit cards, remote deposit capture services, online and mobile banking services, e-statements, and bank-by-mail and direct deposit services, as well as business accounts, and cash and treasury management services. It also provides lending services, such as residential and commercial real estate loans, construction loans, commercial business loans, and credit card lines, as well as loans to individuals comprising secured and unsecured installment and term loans, car loans, and boat loans. In addition, the company originates residential mortgages for sale in the secondary market; and offers short-term secured real estate financing services. It operates through five commercial bank branches, four mortgage offices, one loan production office, a limited service branch, corporate offices, and operations facilities in the greater Washington, D.C. and Baltimore, Maryland markets. The company was incorporated in 1998 and is headquartered in Rockville, Maryland.

About First Merchants

First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides community banking services. It accepts time, savings, and demand deposits; and provides consumer, commercial, agri-business, and real estate mortgage loans, as well as rents safe deposit facilities. The company also provides personal and corporate trust; brokerage and private wealth management; and letters of credit, repurchase agreements, and other corporate services, as well as electronic and mobile delivery channels. It operates 116 banking locations in 31 Indiana, 2 Illinois, and 2 Ohio counties. The company offers its services through electronic and mobile delivery channels. First Merchants Corporation was founded in 1982 and is headquartered in Muncie, Indiana.

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