Contrasting United Bancshares (NASDAQ:UBOH) and First Merchants (NASDAQ:FRME)

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

Analyst Recommendations

This is a summary of recent ratings and price targets for United Bancshares and First Merchants, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
United Bancshares	0	0	0	0	0.00
First Merchants	0	1	4	0	2.80

First Merchants has a consensus price target of $49.00, indicating a potential upside of 12.85%. Given First Merchants’ stronger consensus rating and higher probable upside, analysts plainly believe First Merchants is more favorable than United Bancshares.

Dividends

United Bancshares pays an annual dividend of $0.88 per share and has a dividend yield of 3.1%. First Merchants pays an annual dividend of $1.40 per share and has a dividend yield of 3.2%. United Bancshares pays out 28.7% of its earnings in the form of a dividend. First Merchants pays out 40.9% 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 raised its dividend for 13 consecutive years. First Merchants is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider & Institutional Ownership

1.0% of United Bancshares shares are held by institutional investors. Comparatively, 73.9% of First Merchants shares are held by institutional investors. 6.6% of United Bancshares shares are held by insiders. Comparatively, 1.3% of First Merchants shares are held 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.

Valuation & Earnings

This table compares United Bancshares and First Merchants”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
United Bancshares	$61.70 million	1.38	$9.15 million	$3.07	9.36
First Merchants	$1.07 billion	2.37	$201.40 million	$3.42	12.70

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

Volatility and Risk

United Bancshares has a beta of 0.27, suggesting that its share price is 73% less volatile than the S&P 500. Comparatively, First Merchants has a beta of 1.07, suggesting that its share price is 7% more volatile than the S&P 500.

Profitability

This table compares United Bancshares and First Merchants’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
United Bancshares	14.84%	N/A	N/A
First Merchants	18.76%	9.23%	1.12%

Summary

First Merchants beats United Bancshares on 15 of the 17 factors compared between the two stocks.

About United Bancshares

United Bancshares, Inc. operates as the bank holding company for The Union Bank Company that provides various commercial and consumer banking services. The company accepts various deposits products, such as checking, savings, demand deposit, money market deposit, term certificate, and individual retirement accounts, as well as certificates of deposit. Its loan products include commercial and residential real estate, agricultural, commercial and industrial, home equity, and various types of consumer and small business administration loans. In addition, the company offers wealth management, financial needs analysis, mutual funds, securities trading, annuities, and life insurance services; and treasury management, online and mobile banking, automatic teller machine, bill pay, safe deposit box rental, payment, and other personalized services. It also operates full service banking centers and loan production offices in northwest and central Ohio. United Bancshares, Inc. was founded in 1904 and is headquartered in Columbus Grove, Ohio.

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.