Merchants Bancorp (NASDAQ:MBIN) versus Independent Bank (NASDAQ:INDB) Critical Survey

Independent Bank (NASDAQ:INDB) and Merchants Bancorp (NASDAQ:MBIN) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, valuation, dividends, profitability, analyst recommendations, institutional ownership and risk.

Valuation and Earnings

This table compares Independent Bank and Merchants Bancorp”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Independent Bank	$683.06 million	4.11	$239.50 million	$4.60	14.35
Merchants Bancorp	$632.02 million	2.62	$279.23 million	$6.04	5.99

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

Dividends

Independent Bank pays an annual dividend of $2.28 per share and has a dividend yield of 3.5%. Merchants Bancorp pays an annual dividend of $0.36 per share and has a dividend yield of 1.0%. Independent Bank pays out 49.6% of its earnings in the form of a dividend. Merchants Bancorp pays out 6.0% 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. Independent Bank has raised its dividend for 14 consecutive years. Independent Bank is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Independent Bank and Merchants Bancorp’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Independent Bank	20.26%	6.74%	1.02%
Merchants Bancorp	21.33%	22.36%	1.69%

Insider and Institutional Ownership

83.4% of Independent Bank shares are owned by institutional investors. Comparatively, 24.6% of Merchants Bancorp shares are owned by institutional investors. 0.9% of Independent Bank shares are owned by insiders. Comparatively, 39.7% of Merchants Bancorp shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Risk and Volatility

Independent Bank has a beta of 0.76, indicating that its stock price is 24% less volatile than the S&P 500. Comparatively, Merchants Bancorp has a beta of 1.13, indicating that its stock price is 13% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Independent Bank and Merchants Bancorp, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Independent Bank	0	1	0	2	3.33
Merchants Bancorp	0	1	2	0	2.67

Independent Bank currently has a consensus target price of $78.00, indicating a potential upside of 18.15%. Merchants Bancorp has a consensus target price of $53.83, indicating a potential upside of 48.92%. Given Merchants Bancorp’s higher possible upside, analysts clearly believe Merchants Bancorp is more favorable than Independent Bank.

Summary

Merchants Bancorp beats Independent Bank on 10 of the 18 factors compared between the two stocks.

About Independent Bank

Independent Bank Corp. operates as the bank holding company for Rockland Trust Company that provides commercial banking products and services to individuals and small-to-medium sized businesses in the United States. The company provides interest checking, money market, and savings accounts, as well as demand deposits and time certificates of deposit. It offers commercial real estate and construction, commercial and industrial, small business, secured and unsecured commercial, and consumer real estate loans; term loans and revolving/nonrevolving lines of credit; overdraft protection and letters of credit; and residential mortgages and home equity loans and lines. In addition, the company provides cash management services, such as ACH transaction processing, positive pay, and remote deposit services; investment management and trust services to individuals, institutions, small businesses, and charitable institutions; mobile, online, and telephone banking; estate settlement, financial planning, tax services, and other services; automated teller machines; debit and credit cards; and mutual fund and unit investment trust shares, third party model portfolios, general securities, fixed and variable annuities, and life insurance products, as well as advisory platforms. Further, it invests in low-income housing tax credit projects; holds, maintains, and disposes foreclosed properties; and operates as an investment advisor. Independent Bank Corp. was founded in 1907 and is headquartered in Rockland, Massachusetts.

About Merchants Bancorp

Merchants Bancorp operates as the diversified bank holding company in the United States. It operates through three segments: Multi-family Mortgage Banking, Mortgage Warehousing, and Banking. The Multi-family Mortgage Banking segment engages in the mortgage banking, which originates and services government sponsored mortgages, including bridge financing products to refinance, acquire, or reposition multi-family housing projects, and construction lending for multi-family and healthcare facilities. This segment also offers customized loan products for need-based skilled nursing facilities, such as independent living, assisted living, and memory care; and tax credit equity syndicator service. The Mortgage Warehousing segment funds agency eligible residential loans, as well as commercial loans to non-depository financial institutions. The Banking segment offers a range of financial products and services to consumers and businesses, which includes retail banking, commercial lending, agricultural lending, retail and correspondent residential mortgage banking, and small business administration lending. Merchants Bancorp was founded in 1990 and is headquartered in Carmel, Indiana.