Reviewing Meridian (NASDAQ:MRBK) & Peoples Financial Services (NASDAQ:PFIS)

Peoples Financial Services (NASDAQ:PFIS) and Meridian (NASDAQ:MRBK) are both small-cap finance companies, but which is the better stock? We will contrast the two companies based on the strength of their analyst recommendations, valuation, institutional ownership, risk, earnings, dividends and profitability.

Profitability

This table compares Peoples Financial Services and Meridian’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Peoples Financial Services	13.81%	7.52%	0.67%
Meridian	6.75%	7.59%	0.53%

Dividends

Peoples Financial Services pays an annual dividend of $1.64 per share and has a dividend yield of 4.1%. Meridian pays an annual dividend of $0.50 per share and has a dividend yield of 4.8%. Peoples Financial Services pays out 50.3% of its earnings in the form of a dividend. Meridian pays out 47.6% 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. Meridian is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk & Volatility

Peoples Financial Services has a beta of 0.5, suggesting that its stock price is 50% less volatile than the S&P 500. Comparatively, Meridian has a beta of 0.72, suggesting that its stock price is 28% less volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and recommmendations for Peoples Financial Services and Meridian, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Peoples Financial Services	0	2	0	0	2.00
Meridian	0	1	0	0	2.00

Peoples Financial Services presently has a consensus price target of $45.00, indicating a potential upside of 13.26%. Meridian has a consensus price target of $13.00, indicating a potential upside of 25.73%. Given Meridian’s higher possible upside, analysts plainly believe Meridian is more favorable than Peoples Financial Services.

Insider and Institutional Ownership

31.7% of Peoples Financial Services shares are owned by institutional investors. Comparatively, 58.6% of Meridian shares are owned by institutional investors. 4.1% of Peoples Financial Services shares are owned by company insiders. Comparatively, 14.0% of Meridian shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares Peoples Financial Services and Meridian’s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Peoples Financial Services	$96.91 million	2.89	$27.38 million	$3.26	12.19
Meridian	$101.19 million	1.14	$13.24 million	$1.05	9.85

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

Summary

Meridian beats Peoples Financial Services on 8 of the 14 factors compared between the two stocks.

About Peoples Financial Services

Peoples Financial Services Corp. operates as the bank holding company for Peoples Security Bank and Trust Company that provides various commercial and retail banking services. The company accepts money market, negotiable order of withdrawal, savings, individual retirement, demand deposit, and certificates of deposit accounts. It also provides residential real estate, automobile, manufactured housing, personal, and home equity loans; and commercial real estate, working capital, construction, small business administration, and agricultural loans, as well as loans for equipment and other commercial needs, and mineral rights. In addition, the company offers fiduciary and investment services; investment management, IRA trustee, estate administration, living and life insurance trust, trustee under will, guardianship, custodial/IRA custodial, and corporate trust services, as well as pension and profit-sharing plans. Further, it provides wealth management products and services comprising investment portfolio management, estate and business succession planning, annuities, insurance, retirement plan, and tax planning, as well as education funding strategies; and securities, brokerage, and investor services. Additionally, the company offers small business checking and merchant money market accounts, online and telephone banking, business credit cards, merchant line of credit, and financial checkup services; and remote deposit capture, automatic clearing house transaction, cash management, automated teller machine, point of sale transaction, safe deposit box, night depository, direct deposit, and official check services. It serves business, non-profit, governmental, municipal agency, and professional customers, as well as retail customers. Peoples Financial Services Corp. was founded in 1905 and is headquartered in Scranton, Pennsylvania.

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.