Critical Survey: Shinhan Financial Group (NYSE:SHG) versus Meridian (NASDAQ:MRBK)

Shinhan Financial Group (NYSE:SHG) and Meridian (NASDAQ:MRBK) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, risk, earnings, analyst recommendations, dividends, institutional ownership and profitability.

Profitability

This table compares Shinhan Financial Group and Meridian’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Shinhan Financial Group	12.21%	7.34%	0.59%
Meridian	8.28%	10.01%	0.70%

Dividends

Shinhan Financial Group pays an annual dividend of $1.20 per share and has a dividend yield of 3.5%. Meridian pays an annual dividend of $0.50 per share and has a dividend yield of 3.0%. Shinhan Financial Group pays out 18.8% of its earnings in the form of a dividend. Meridian pays out 34.5% 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. Shinhan Financial Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Shinhan Financial Group and Meridian”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Shinhan Financial Group	$7,044.37 billion	0.00	$3.49 billion	$6.37	5.39
Meridian	$197.37 million	0.96	$16.35 million	$1.45	11.66

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

Volatility & Risk

Shinhan Financial Group has a beta of 0.94, indicating that its stock price is 6% less volatile than the S&P 500. Comparatively, Meridian has a beta of 0.83, indicating that its stock price is 17% less volatile than the S&P 500.

Insider & Institutional Ownership

7.8% of Shinhan Financial Group shares are held by institutional investors. Comparatively, 58.6% of Meridian shares are held by institutional investors. 1.0% of Shinhan Financial Group shares are held by company insiders. Comparatively, 14.0% of Meridian shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and target prices for Shinhan Financial Group and Meridian, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Shinhan Financial Group	0	0	0	0	0.00
Meridian	0	1	1	0	2.50

Meridian has a consensus price target of $16.00, suggesting a potential downside of 5.33%. Given Meridian’s stronger consensus rating and higher possible upside, analysts clearly believe Meridian is more favorable than Shinhan Financial Group.

Summary

Meridian beats Shinhan Financial Group on 9 of the 16 factors compared between the two stocks.

About Shinhan Financial Group

Shinhan Financial Group Co., Ltd. provides financial products and services in South Korea and internationally. The company operates through six segments: Banking, Credit Card, Securities, Insurance, Credit, and Others. It offers retail banking services, including demand, savings, and fixed deposit-taking; checking accounts; mortgage and home equity, and retail lending; electronic banking and automatic teller machines (ATM); and bill paying, payroll and check-cashing, currency exchange, and wire fund transfer services. The company also provides corporate banking services, such as investment banking, real estate financing, overseas real estate and development project financing, infrastructure and structured financing, equity/venture investments, mergers and acquisitions consulting; securitization and derivatives services comprising securities and derivative products, and foreign exchange trading; business expansion financing and consulting services; and working capital loans and facilities loans. In addition, it is involved in treasury and investment activities in international capital markets consisting of foreign currency-denominated securities trading, foreign exchange trading and services, trade-related financial services, international factoring services, and foreign banking operations. Further, the company offers real estate trust, investment advisory, venture business investment, life and non-life insurance, trust account management, securities brokerage, and asset management services, as well as leasing and equipment financing, savings banking, loan collection and credit reporting, collective investment administration, private equity investment, and financial system development services. Additionally, it provides transaction history inquiries and fund transfers, opening letters of credit, trade finance, payment and collection management, sales and acquisition settlement, business-to-business settlement, sweeping, pooling, ERP interface, host-to-host banking, SWIFT SCORE, and cash and liquidity management service. Shinhan Financial Group Co., Ltd. was founded in 1982 and is headquartered in Seoul, South Korea.

About Meridian

Meridian Corporation operates as the holding company for Meridian Bank that provides commercial banking products and services in Pennsylvania, New Jersey, Delaware, Florida, and Maryland. The company offers various deposit products, such as demand non-interest bearing, demand interest bearing, savings accounts, money market accounts, and time deposits. It also provides commercial and industrial loans comprising business lines of credit, term loans, small business lending, lease financing, shared national credits, and other financing; commercial real estate, and land development and construction loans for residential and commercial projects; and consumer and home equity lending, private banking, merchant, and title and land settlement services. In addition, the company operates and originates mortgage loans for 1-4 family dwellings; and offers real estate holding, investment advisory, and equipment leasing services, as well as financial planning and wealth management services. Meridian Corporation was incorporated in 2004 and is headquartered in Malvern, Pennsylvania.