Analyzing Independent Bank (NASDAQ:IBCP) and Franklin Financial Services (NASDAQ:FRAF)

Franklin Financial Services (NASDAQ:FRAF) and Independent Bank (NASDAQ:IBCP) are both small-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, risk, earnings, institutional ownership, profitability, analyst recommendations and dividends.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Franklin Financial Services	$91.61 million	1.57	$13.60 million	$3.17	10.28
Independent Bank	$290.35 million	2.77	$59.07 million	$2.94	13.11

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

Institutional and Insider Ownership

24.8% of Franklin Financial Services shares are held by institutional investors. Comparatively, 79.4% of Independent Bank shares are held by institutional investors. 6.9% of Franklin Financial Services shares are held by company insiders. Comparatively, 5.5% of Independent Bank shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Volatility & Risk

Franklin Financial Services has a beta of 0.3, indicating that its share price is 70% less volatile than the S&P 500. Comparatively, Independent Bank has a beta of 0.99, indicating that its share price is 1% less volatile than the S&P 500.

Dividends

Franklin Financial Services pays an annual dividend of $1.28 per share and has a dividend yield of 3.9%. Independent Bank pays an annual dividend of $0.96 per share and has a dividend yield of 2.5%. Franklin Financial Services pays out 40.4% of its earnings in the form of a dividend. Independent Bank pays out 32.7% 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.

Profitability

This table compares Franklin Financial Services and Independent Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Franklin Financial Services	12.40%	10.48%	0.72%
Independent Bank	19.93%	15.26%	1.24%

Analyst Recommendations

This is a summary of recent recommendations and price targets for Franklin Financial Services and Independent Bank, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Franklin Financial Services	0	0	0	0	0.00
Independent Bank	0	4	0	0	2.00

Independent Bank has a consensus price target of $32.17, indicating a potential downside of 16.52%. Given Independent Bank’s stronger consensus rating and higher possible upside, analysts clearly believe Independent Bank is more favorable than Franklin Financial Services.

Summary

Independent Bank beats Franklin Financial Services on 12 of the 15 factors compared between the two stocks.

About Franklin Financial Services

Franklin Financial Services Corporation operates as the bank holding company for Farmers and Merchants Trust Company of Chambersburg that provides commercial, retail banking, and trust services to businesses, individuals, governmental entities, and non-profit organizations in Pennsylvania. It offers various deposit products, including checking, savings, money management, and time deposit accounts, as well as demand deposits. The company also provides commercial real estate, construction and land development, commercial and industrial, and residential mortgage loans, as well as installment and revolving loans; consumer loans comprising unsecured personal lines of credit and installment loans; and secured and unsecured commercial and industrial loans, including accounts receivable and inventory financing, and commercial equipment financing. In addition, it offers various investment and trust services comprising estate planning and administration, corporate and personal trust fund management, pension, and profit sharing and other employee benefit funds management services, and custodial services, as well as non-trust related investment services; sells mutual funds, annuities, and insurance products; and offers safe deposit, pension, and fiduciary services. Further, the company engages in non-bank investment activities, such as venture capital investments. The company was founded in 1906 and is headquartered in Chambersburg, Pennsylvania.

About Independent Bank

Independent Bank Corporation operates as the bank holding company for Independent Bank that provides commercial banking services to individuals and businesses in rural and suburban communities in Michigan. It offers checking and savings accounts, commercial lending, direct and indirect consumer financing, mortgage lending, and safe deposit box services. The company also provides title insurance services and investment services, as well as automatic teller machines, and internet and mobile banking services. In addition, it operates through branches, drive-thru facilities, and loan production offices. Independent Bank Corporation was founded in 1864 and is based in Grand Rapids, Michigan.