Comparing First Merchants (FRME) and TCF Financial (TCF)

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First Merchants (NYSE: TCF) and TCF Financial (NYSE:TCF) are both mid-cap finance companies, but which is the better stock? We will compare the two companies based on the strength of their dividends, institutional ownership, risk, profitability, valuation, analyst recommendations and earnings.

Valuation & Earnings

This table compares First Merchants and TCF Financial’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
First Merchants $385.90 million 6.13 $96.07 million $2.41 19.80
TCF Financial $1.47 billion 2.88 $268.63 million $1.20 20.98

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

Profitability

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

Net Margins Return on Equity Return on Assets
First Merchants 28.09% 10.44% 1.45%
TCF Financial 19.04% 11.81% 1.21%

Institutional and Insider Ownership

70.3% of First Merchants shares are held by institutional investors. Comparatively, 81.4% of TCF Financial shares are held by institutional investors. 1.4% of First Merchants shares are held by insiders. Comparatively, 2.3% of TCF Financial shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Dividends

First Merchants pays an annual dividend of $0.88 per share and has a dividend yield of 1.8%. TCF Financial pays an annual dividend of $0.60 per share and has a dividend yield of 2.4%. First Merchants pays out 36.5% of its earnings in the form of a dividend. TCF Financial pays out 50.0% 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 6 consecutive years.

Risk & Volatility

First Merchants has a beta of 0.89, meaning that its share price is 11% less volatile than the S&P 500. Comparatively, TCF Financial has a beta of 1.04, meaning that its share price is 4% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations for First Merchants and TCF Financial, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
First Merchants 0 2 1 0 2.33
TCF Financial 1 10 4 0 2.20

First Merchants currently has a consensus target price of $50.00, indicating a potential upside of 4.78%. TCF Financial has a consensus target price of $25.46, indicating a potential upside of 1.12%. Given First Merchants’ stronger consensus rating and higher possible upside, analysts clearly believe First Merchants is more favorable than TCF Financial.

Summary

TCF Financial beats First Merchants on 9 of the 17 factors compared between the two stocks.

First Merchants Company Profile

First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides community banking services. It accepts time, savings, and demand deposits; and provides consumer, commercial, agri-business, and real estate mortgage loans, as well as rents safe deposit facilities. The company also provides personal and corporate trust, full-service brokerage, corporate, letters of credit, and repurchase agreements services. It operates 119 banking locations in 31 Indiana, 2 Illinois, and 2 Ohio counties. The company's delivery channels include ATMs, check cards, remote deposit capture, interactive voice response systems, and Internet technology. First Merchants Corporation was founded in 1893 and is headquartered in Muncie, Indiana.

TCF Financial Company Profile

TCF Financial Corporation operates as the holding company for TCF National Bank that provides various financial products and services in the United States and Canada. It operates through Consumer Banking, Wholesale Banking, and Enterprise Services segments. The company offers checking, savings, and money market accounts; certificates of deposits; and individual retirement accounts. It also provides consumer loans; loans secured by personal property, as well as unsecured personal loans; commercial real estate products; lease and equipment financing products; inventory financing products; and residential, consumer, and small business lending products. In addition, the company offers treasury services, such as investment and borrowing portfolios, as well as manages capital, debt, and market risks. Further, it provides credit, debit, and prepaid cards; and check cashing and remittance services. As of December 31, 2017, the company had 320 branches consisting of 189 traditional branches, 128 supermarket branches, and 3 campus branches. TCF Financial Corporation was founded in 1923 and is headquartered in Wayzata, Minnesota.

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