Critical Survey: MainSource Financial Group (MSFG) versus TCF Financial (TCF)

MainSource Financial Group (NASDAQ: MSFG) and TCF Financial (NYSE:TCF) are both finance companies, but which is the better business? We will contrast the two companies based on the strength of their risk, analyst recommendations, valuation, institutional ownership, earnings, profitability and dividends.

Volatility and Risk

MainSource Financial Group has a beta of 0.92, suggesting that its stock price is 8% less volatile than the S&P 500. Comparatively, TCF Financial has a beta of 1.29, suggesting that its stock price is 29% more volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
MainSource Financial Group 21.86% 10.65% 1.20%
TCF Financial 15.27% 9.63% 0.98%

Analyst Recommendations

This is a summary of current recommendations and price targets for MainSource Financial Group and TCF Financial, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
MainSource Financial Group 0 2 0 0 2.00
TCF Financial 1 7 6 0 2.36

MainSource Financial Group presently has a consensus target price of $44.50, indicating a potential upside of 18.29%. TCF Financial has a consensus target price of $19.17, indicating a potential downside of 7.81%. Given MainSource Financial Group’s higher probable upside, analysts plainly believe MainSource Financial Group is more favorable than TCF Financial.

Valuation and Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
MainSource Financial Group $180.94 million 5.32 $38.32 million $1.78 21.13
TCF Financial $1.40 billion 2.56 $212.12 million $1.13 18.40

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

Institutional & Insider Ownership

58.0% of MainSource Financial Group shares are held by institutional investors. Comparatively, 82.3% of TCF Financial shares are held by institutional investors. 4.8% of MainSource Financial Group shares are held by company insiders. Comparatively, 2.5% of TCF Financial shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Dividends

MainSource Financial Group pays an annual dividend of $0.33 per share and has a dividend yield of 0.9%. TCF Financial pays an annual dividend of $0.30 per share and has a dividend yield of 1.4%. MainSource Financial Group pays out 18.5% of its earnings in the form of a dividend. TCF Financial pays out 26.5% 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.

Summary

MainSource Financial Group beats TCF Financial on 9 of the 16 factors compared between the two stocks.

MainSource Financial Group Company Profile

MainSource Financial Group, Inc. is a bank holding company. The Company operates a banking subsidiary, MainSource Bank (the Bank), an Indiana state-chartered bank. Through the Bank, the Company offers a range of financial services, including accepting time and transaction deposits; making consumer, commercial, agribusiness and real estate mortgage loans; renting safe deposit facilities; providing personal and corporate trust services, and providing other corporate services, such as letters of credit and repurchase agreements. The Bank offers various loans, such as commercial loans, commercial real estate loans, residential loans and consumer loans. Commercial loans include secured and unsecured loans, including real estate loans, to individuals and companies and to governmental units within the market area of the Bank. It offers various deposits, which include demand, interest bearing demand, savings/money markets and certificates of deposit.

TCF Financial Company Profile

TCF Financial Corporation (TCF) is a bank holding company. The Company’s principal subsidiary is TCF National Bank (TCF Bank). The Company operates in three segments: Consumer Banking, Wholesale Banking and Enterprise Services. Consumer Banking comprises all of the Company’s consumer-facing businesses. The Consumer Banking segment includes retail banking, consumer real estate and auto finance. Wholesale Banking comprises commercial real estate and business lending, leasing and equipment finance and inventory finance. TCF’s consumer banking strategy is primarily to generate deposits to use for funding high credit quality secured loans and leases. Enterprise Services comprises corporate treasury, corporate functions and the Holding Company. As of December 31, 2016, the Company’s total securities available for sale were $1.4 billion. As of December 31, 2016, the Company’s total loans were $17.8 billion. As of December 31, 2016, the Company’s total deposits were $17.2 billion.

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