First Merchants Corp (FRMEP) stock analysis

P/E above its 5-year median

First Merchants's P/E of 12.6 is above its own 5-year median of 10.6.

P/E above the industry

First Merchants's P/E of 12.6 is above the Commercial Banks median of 12.3.

P/S below the industry

First Merchants's price-to-sales of 3.52 is below the Commercial Banks median of 3.64.

P/B below the industry

First Merchants's price-to-book of 0.97 is below the Commercial Banks median of 1.27.

Trading below fair value

The share price of $40.59 is below our fair value estimate of $41.94.

Margin of safety under 20%

The price is 3.2% below fair value, less than the 20% cushion we look for.

Revenue growing under 10% a year

Revenue grew 1.8% a year over the last three fiscal years, short of the 10% we look for.

EPS growing under 10% a year

Diluted EPS grew 0.6% a year over the last three fiscal years.

Earnings growth not accelerating

Net income grew -15.3% over the last twelve months, against a 5-year average of 8.7% a year.

Growing slower than the industry

Revenue grew 8.5% over the last twelve months; the Commercial Banks median is 11.4%.

Company guidance

No outlook found in earnings releases from the last twelve months.

Gross margin trend

Banks and insurers do not report gross profit.

Return on equity under 15%

Return on equity was 7.8% over the last twelve months and averaged 10.2% over five years; we look for 15% on both.

Return on assets under 1%

Return on assets was 1.0%; for a bank or insurer, 1% or more is considered good.

Return on equity below the industry

First Merchants's return on equity of 7.8% is below the Commercial Banks median of 11.2%.

Earnings grew over 5 years

Net income grew 8.7% a year on average over the last five fiscal years.

Net margin below its 5-year average

Net margin was 27.3% over the last twelve months, against a 5-year average of 34.9%.

Net margin below the industry

First Merchants's net margin of 27.3% is below the Commercial Banks median of 30.0%.

Well capitalized

Equity is 12.5% of total assets; 8% or more is a comfortable cushion.

Loans funded by deposits

Loans equal 90.9% of deposits, so lending is funded by customer deposits.

Adequate loan-loss reserve

The allowance for credit losses is 1.4% of loans; we look for at least 1%.

High cost base

Non-interest expense takes 63.0% of revenue; under 60% is efficient for a bank.

Deposits growing

Deposits grew 13.8% over the past year.

Borrowings

Needs debt and equity figures.

Pays a dividend

First Merchants paid dividends worth 3.6% of the share price over the last twelve months.

Yield below Treasuries

The 3.6% yield is below the 4.4% on a 1-year Treasury.

Yield below the top quarter

The top quarter of US dividend payers yield 4.0% or more; First Merchants yields 3.6%.

Dividend not cut

The dividend per share has not fallen by more than 10% in any of the last 10 fiscal years.

Covered by earnings

Dividends take 45.6% of net income.

Cash-flow cover

Needs dividends paid and free cash flow.