Bank OZK (NASDAQ:OZK) vs. Mercantile Bank (NASDAQ:MBWM) Critical Analysis

Bank OZK (NASDAQ:OZK) and Mercantile Bank (NASDAQ:MBWM) are both finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, valuation, dividends, profitability, institutional ownership, analyst recommendations and risk.

Analyst Ratings

This is a summary of current recommendations and price targets for Bank OZK and Mercantile Bank, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bank OZK	1	7	1	0	2.00
Mercantile Bank	0	2	2	0	2.50

Bank OZK currently has a consensus target price of $50.00, suggesting a potential downside of 2.82%. Mercantile Bank has a consensus target price of $54.67, suggesting a potential upside of 11.45%. Given Mercantile Bank’s stronger consensus rating and higher probable upside, analysts plainly believe Mercantile Bank is more favorable than Bank OZK.

Dividends

Bank OZK pays an annual dividend of $1.68 per share and has a dividend yield of 3.3%. Mercantile Bank pays an annual dividend of $1.44 per share and has a dividend yield of 2.9%. Bank OZK pays out 27.4% of its earnings in the form of a dividend. Mercantile Bank pays out 29.1% 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. Bank OZK has raised its dividend for 29 consecutive years and Mercantile Bank has raised its dividend for 14 consecutive years. Bank OZK is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Bank OZK and Mercantile Bank”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bank OZK	$2.77 billion	2.10	$716.46 million	$6.14	8.38
Mercantile Bank	$361.89 million	2.19	$79.59 million	$4.95	9.91

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

Risk & Volatility

Bank OZK has a beta of 1.2, suggesting that its stock price is 20% more volatile than the S&P 500. Comparatively, Mercantile Bank has a beta of 1, suggesting that its stock price has a similar volatility profile to the S&P 500.

Institutional and Insider Ownership

86.2% of Bank OZK shares are held by institutional investors. Comparatively, 58.6% of Mercantile Bank shares are held by institutional investors. 6.7% of Bank OZK shares are held by insiders. Comparatively, 3.1% of Mercantile Bank shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Bank OZK and Mercantile Bank’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bank OZK	25.83%	13.90%	1.93%
Mercantile Bank	21.99%	14.29%	1.41%

Summary

Bank OZK beats Mercantile Bank on 11 of the 17 factors compared between the two stocks.

About Bank OZK

Bank OZK provides various retail and commercial banking services for individuals and businesses in the United States. The company offers deposit services, including non-interest bearing checking, interest bearing transaction, business sweep, savings, money market, individual retirement, and other accounts, as well as time and reciprocal deposits. It also provides trust and wealth services, such as personal trusts, custodial accounts, investment management accounts, and retirement accounts, as well as corporate trust services, including trustee, paying agent and registered transfer agent services, and other related services. In addition, the company offers treasury management services comprising automated clearing house, wire transfer, transaction reporting, wholesale lockbox, remote deposit capture, automated credit line transfer, reconciliation, positive pay, commercial card, and other services, as well as zero balance and investment sweep accounts. Further, it provides real estate, consumer, small business, indirect recreational vehicle and marine, equipment, agricultural, commercial and industrial, government guaranteed, lines of credit, homebuilder, and affordable housing loans; lender and structured, business aviation, and subscription financing services; and mortgage and other lending products. Additionally, the company offers ATMs; telephone, online, and mobile banking services; credit and debit cards; safe deposit boxes; and other products and services. The company was formerly known as Bank of the Ozarks and changed its name to Bank OZK in July 2018. Bank OZK was founded in 1903 and is headquartered in Little Rock, Arkansas.

About Mercantile Bank

Mercantile Bank Corporation operates as the bank holding company for Mercantile Bank of Michigan that provides commercial and retail banking services to small- to medium-sized businesses and individuals in the United States. It accepts various deposit products, including checking, savings, and term certificate accounts; time deposits; and certificates of deposit. The company also provides commercial and industrial loans; vacant land, land development, and residential construction loans; owner and non-owner occupied real estate loans; multi-family and residential rental property loans; single-family residential real estate loans; home equity line of credit programs; and consumer loans, such as new and used automobile and boat loans, and credit cards, as well as overdraft protection services; and residential mortgage and instalment loans. In addition, it offers courier services and safe deposit facilities; and insurance products, such as private passenger automobile, homeowners, personal inland marine, boat owners, recreational vehicle, dwelling fire, umbrella policies, small business, and life insurance products. The company was incorporated in 1997 and is headquartered in Grand Rapids, Michigan.