Financial Comparison: First Merchants (NASDAQ:FRME) versus OceanFirst Financial (NASDAQ:OCFC)

OceanFirst Financial (NASDAQ:OCFC) and First Merchants (NASDAQ:FRME) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their valuation, institutional ownership, profitability, earnings, dividends, risk and analyst recommendations.

Valuation & Earnings

This table compares OceanFirst Financial and First Merchants”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
OceanFirst Financial	$384.08 million	3.14	$104.03 million	$1.75	11.78
First Merchants	$999.49 million	2.56	$223.79 million	$3.03	14.42

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

Dividends

OceanFirst Financial pays an annual dividend of $0.80 per share and has a dividend yield of 3.9%. First Merchants pays an annual dividend of $1.40 per share and has a dividend yield of 3.2%. OceanFirst Financial pays out 45.7% of its earnings in the form of a dividend. First Merchants pays out 46.2% 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. First Merchants has increased its dividend for 13 consecutive years. OceanFirst Financial is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for OceanFirst Financial and First Merchants, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
OceanFirst Financial	0	4	2	0	2.33
First Merchants	0	2	3	0	2.60

OceanFirst Financial currently has a consensus target price of $19.75, indicating a potential downside of 4.17%. First Merchants has a consensus target price of $41.60, indicating a potential downside of 4.78%. Given OceanFirst Financial’s higher probable upside, analysts clearly believe OceanFirst Financial is more favorable than First Merchants.

Insider & Institutional Ownership

71.0% of OceanFirst Financial shares are owned by institutional investors. Comparatively, 73.9% of First Merchants shares are owned by institutional investors. 5.0% of OceanFirst Financial shares are owned by insiders. Comparatively, 1.3% of First Merchants shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Volatility and Risk

OceanFirst Financial has a beta of 1.01, indicating that its share price is 1% more volatile than the S&P 500. Comparatively, First Merchants has a beta of 1.01, indicating that its share price is 1% more volatile than the S&P 500.

Profitability

This table compares OceanFirst Financial and First Merchants’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
OceanFirst Financial	15.28%	6.08%	0.76%
First Merchants	16.94%	8.94%	1.08%

Summary

First Merchants beats OceanFirst Financial on 11 of the 16 factors compared between the two stocks.

About OceanFirst Financial

OceanFirst Financial Corp. operates as the bank holding company for OceanFirst Bank N.A. that provides community banking services to retail and commercial customers. It accepts money market accounts, savings accounts, interest-bearing checking accounts, non-interest-bearing accounts, and time deposits, that includes brokered deposits to retail, government, and business customers. The company also offers commercial real estate, multi-family, land loans, construction, and commercial and industrial loans; fixed-rate and adjustable-rate mortgage loans that are secured by one-to-four family residences; and consumer loans, such as home equity loans and lines of credit, student loans, overdraft line of credit, loans on savings accounts, and other consumer loans. In addition, it invests in mortgage-backed securities, securities issued by the U.S. Government and agencies, corporate securities, and other investments. Further, the company offers bankcard, trust and asset management services; and bank owned life insurance products. The company was founded in 1902 and is based in Red Bank, New Jersey.

About First Merchants

First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides community banking services. The company offers a range of financial services, including time, savings, and demand deposits; and consumer, commercial, agri-business, public finance, and real estate mortgage loans. It also provides personal and corporate trust; brokerage and private wealth management; and letters of credit, repurchase agreements, and other corporate services. The company operates banking locations in Indiana, Illinois, Ohio, and Michigan counties. It also offers its services through electronic and mobile delivery channels. First Merchants Corporation was founded in 1893 and is headquartered in Muncie, Indiana.