First Merchants Return On Equity vs. Operating Margin
| FRME Stock | USD 43.82 0.64 1.48% |
For First Merchants profitability analysis, we use financial ratios and fundamental drivers that measure the ability of First Merchants to generate income relative to revenue, assets, operating costs, and current equity. These fundamental indicators attest to how well First Merchants utilizes its assets to generate profit and value for its shareholders. The profitability module also shows relationships between First Merchants's most relevant fundamental drivers. It provides multiple suggestions of what could affect the performance of First Merchants over time as well as its relative position and ranking within its peers.
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Is Regional Banks space expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of First Merchants. If investors know First will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about First Merchants listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
The market value of First Merchants is measured differently than its book value, which is the value of First that is recorded on the company's balance sheet. Investors also form their own opinion of First Merchants' value that differs from its market value or its book value, called intrinsic value, which is First Merchants' true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because First Merchants' market value can be influenced by many factors that don't directly affect First Merchants' underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between First Merchants' value and its price as these two are different measures arrived at by different means. Investors typically determine if First Merchants is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, First Merchants' price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.
First Merchants Operating Margin vs. Return On Equity Fundamental Analysis
Comparative valuation techniques use various fundamental indicators to help in determining First Merchants's current stock value. Our valuation model uses many indicators to compare First Merchants value to that of its competitors to determine the firm's financial worth. First Merchants is rated below average in return on equity category among its peers. It is rated # 2 in operating margin category among its peers reporting about 5.09 of Operating Margin per Return On Equity. Comparative valuation analysis is a catch-all technique that is used if you cannot value First Merchants by discounting back its dividends or cash flows. It compares the stock's price multiples to nearest competition to determine if the stock is relatively undervalued or overvalued.First Operating Margin vs. Return On Equity
Return on Equity or ROE tells company stockholders how effectually their money is being utilized or reinvested. It is a useful ratio when analyzing company profitability or the management effectiveness given the capital invested by the shareholders. ROE shows how efficiently a company utilizes investments to generate income.
First Merchants |
| = | 0.0817 |
For most industries, Return on Equity between 10% and 30% are considered desirable to provide dividends to owners and have funds for the future growth of the company. Investors should be very careful using ROE as the only efficiency indicator because ROE can be high if a company is heavily leveraged.
Operating Margin shows how much operating income a company makes on each dollar of sales. It is one of the profitability indicators which helps analysts to understand whether the firm is successful or not making money from everyday operations.
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| = | 0.42 % |
A good Operating Margin is required for a company to be able to pay for its fixed costs or payout its debt, which implies that the higher the margin, the better. This ratio is most effective in evaluating the earning potential of a company over time when comparing it against a firm's competitors.
First Operating Margin Comparison
First Merchants is currently under evaluation in operating margin category among its peers.
First Merchants Profitability Projections
The most important aspect of a successful company is its ability to generate a profit. For investors in First Merchants, profitability is also one of the essential criteria for including it into their portfolios because, without profit, First Merchants will eventually generate negative long term returns. The profitability progress is the general direction of First Merchants' change in net profit over the period of time. It can combine multiple indicators of First Merchants, where stable trends show no significant progress. An accelerating trend is seen as positive, while a decreasing one is unfavorable. A rising trend means that profits are rising, and operational efficiency may be rising as well. A decreasing trend is a sign of poor performance and may indicate upcoming losses.
First Merchants Corporation operates as the financial holding company for First Merchants Bank that provides community banking services. First Merchants Corporation was founded in 1893 and is headquartered in Muncie, Indiana. First Merchants operates under BanksRegional classification in the United States and is traded on NASDAQ Exchange. It employs 1821 people.
First Profitability Driver Comparison
Profitability drivers are factors that can directly affect your investment outlook on First Merchants. Investors often realize that things won't turn out the way they predict. There are maybe way too many unforeseen events and contingencies during the holding period of First Merchants position where the market behavior may be hard to predict, tax policy changes, gold or oil price hikes, calamities change, and many others. The question is, are you prepared for these unexpected events? Although some of these situations are obviously beyond your control, you can still follow the important profit indicators to know where you should focus on when things like this occur. Below are some of the First Merchants' important profitability drivers and their relationship over time.
Use First Merchants in pair-trading
One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if First Merchants position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Merchants will appreciate offsetting losses from the drop in the long position's value.First Merchants Pair Trading
First Merchants Pair Trading Analysis
The ability to find closely correlated positions to First Merchants could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace First Merchants when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back First Merchants - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling First Merchants to buy it.
The correlation of First Merchants is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as First Merchants moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if First Merchants moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for First Merchants can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.Use Investing Themes to Complement your First Merchants position
In addition to having First Merchants in your portfolios, you can quickly add positions using our predefined set of ideas and optimize them against your very unique investing style. A single investing idea is a collection of funds, stocks, ETFs, or cryptocurrencies that are programmatically selected from a pull of investment themes. After you determine your investment opportunity, you can then find an optimal portfolio that will maximize potential returns on the chosen idea or minimize its exposure to market volatility.Did You Try This Idea?
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Check out Investing Opportunities. For information on how to trade First Stock refer to our How to Trade First Stock guide.You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
To fully project First Merchants' future profitability, investors should examine all historical financial statements. These statements provide investors with a comprehensive snapshot of the financial position of First Merchants at a specified time, usually calculated after every quarter, six months, or one year. Three primary documents fall into the category of financial statements. These documents include First Merchants' income statement, its balance sheet, and the statement of cash flows.