Critical Survey: National Bankshares (NASDAQ:NKSH) & Meridian (NASDAQ:MRBK)

National Bankshares (NASDAQ:NKSH) and Meridian (NASDAQ:MRBK) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, institutional ownership, earnings, dividends, profitability and risk.

Profitability

This table compares National Bankshares and Meridian’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
National Bankshares	11.44%	5.85%	0.50%
Meridian	6.00%	6.99%	0.49%

Volatility & Risk

National Bankshares has a beta of 0.61, meaning that its share price is 39% less volatile than the S&P 500. Comparatively, Meridian has a beta of 0.81, meaning that its share price is 19% less volatile than the S&P 500.

Dividends

National Bankshares pays an annual dividend of $1.56 per share and has a dividend yield of 5.2%. Meridian pays an annual dividend of $0.50 per share and has a dividend yield of 3.0%. National Bankshares pays out 107.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Meridian pays out 49.5% of its earnings in the form of a dividend.

Earnings and Valuation

This table compares National Bankshares and Meridian”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
National Bankshares	$68.19 million	2.80	$15.69 million	$1.45	20.69
Meridian	$168.55 million	1.10	$13.24 million	$1.01	16.30

National Bankshares has higher earnings, but lower revenue than Meridian. Meridian is trading at a lower price-to-earnings ratio than National Bankshares, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

29.7% of National Bankshares shares are owned by institutional investors. Comparatively, 58.6% of Meridian shares are owned by institutional investors. 2.8% of National Bankshares shares are owned by insiders. Comparatively, 14.0% of Meridian shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of current recommendations and price targets for National Bankshares and Meridian, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
National Bankshares	0	0	1	0	3.00
Meridian	0	1	1	0	2.50

National Bankshares presently has a consensus target price of $38.00, suggesting a potential upside of 26.67%. Meridian has a consensus target price of $16.00, suggesting a potential downside of 2.79%. Given National Bankshares’ stronger consensus rating and higher possible upside, equities analysts plainly believe National Bankshares is more favorable than Meridian.

Summary

National Bankshares beats Meridian on 9 of the 15 factors compared between the two stocks.

About National Bankshares

National Bankshares, Inc. operates as the bank holding company for the National Bank of Blacksburg that provides retail and commercial banking products and services to individuals, businesses, non-profits, and local governments. The company accepts interest-bearing and non-interest-bearing demand deposit accounts, money market deposit accounts, savings accounts, certificates of deposit, health savings accounts, and individual retirement accounts. Its loan products include commercial and agricultural, commercial real estate, residential real estate, home equity, and various consumer loan products, as well as loans for the construction of commercial and residential properties. The company also provides business and consumer debit and credit cards; letters of credit, night depository services, safe deposit boxes, utility payment services, and automatic funds transfer; wealth management, trust, and estate services; non-deposit investment and insurance products; and telephone, mobile, and Internet banking services. The company was founded in 1891 and is headquartered in Blacksburg, Virginia.

About Meridian

Meridian Corporation operates as the holding company for Meridian Bank that provides commercial banking products and services in Pennsylvania, New Jersey, Delaware, Florida, and Maryland. The company offers various deposit products, such as demand non-interest bearing, demand interest bearing, savings accounts, money market accounts, and time deposits. It also provides commercial and industrial loans comprising business lines of credit, term loans, small business lending, lease financing, shared national credits, and other financing; commercial real estate, and land development and construction loans for residential and commercial projects; and consumer and home equity lending, private banking, merchant, and title and land settlement services. In addition, the company operates and originates mortgage loans for 1-4 family dwellings; and offers real estate holding, investment advisory, and equipment leasing services, as well as financial planning and wealth management services. Meridian Corporation was incorporated in 2004 and is headquartered in Malvern, Pennsylvania.