Critical Contrast: Alerus Financial (NASDAQ:ALRS) vs. Pinnacle Financial Partners (NASDAQ:PNFP)

Alerus Financial (NASDAQ:ALRS) and Pinnacle Financial Partners (NASDAQ:PNFP) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their analyst recommendations, earnings, risk, dividends, profitability, institutional ownership and valuation.

Risk & Volatility

Alerus Financial has a beta of 0.71, suggesting that its stock price is 29% less volatile than the S&P 500. Comparatively, Pinnacle Financial Partners has a beta of 1.09, suggesting that its stock price is 9% more volatile than the S&P 500.

Dividends

Alerus Financial pays an annual dividend of $0.80 per share and has a dividend yield of 3.7%. Pinnacle Financial Partners pays an annual dividend of $0.88 per share and has a dividend yield of 0.7%. Alerus Financial pays out 78.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Pinnacle Financial Partners pays out 14.7% of its earnings in the form of a dividend. Alerus Financial has increased its dividend for 24 consecutive years. Alerus Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Alerus Financial and Pinnacle Financial Partners’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Alerus Financial	6.26%	7.66%	0.68%
Pinnacle Financial Partners	15.48%	9.04%	1.08%

Analyst Ratings

This is a summary of recent ratings and target prices for Alerus Financial and Pinnacle Financial Partners, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Alerus Financial	0	3	2	0	2.40
Pinnacle Financial Partners	0	6	5	0	2.45

Alerus Financial currently has a consensus target price of $23.40, indicating a potential upside of 9.24%. Pinnacle Financial Partners has a consensus target price of $125.18, indicating a potential upside of 4.11%. Given Alerus Financial’s higher possible upside, research analysts clearly believe Alerus Financial is more favorable than Pinnacle Financial Partners.

Earnings and Valuation

This table compares Alerus Financial and Pinnacle Financial Partners”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Alerus Financial	$336.51 million	1.61	$21.07 million	$1.02	21.00
Pinnacle Financial Partners	$3.07 billion	3.03	$475.06 million	$5.98	20.11

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

Insider & Institutional Ownership

51.3% of Alerus Financial shares are held by institutional investors. Comparatively, 87.4% of Pinnacle Financial Partners shares are held by institutional investors. 5.6% of Alerus Financial shares are held by insiders. Comparatively, 1.9% of Pinnacle Financial Partners shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Summary

Pinnacle Financial Partners beats Alerus Financial on 12 of the 17 factors compared between the two stocks.

About Alerus Financial

Alerus Financial Corporation operates as the bank holding company for Alerus Financial, National Association that engages in the provision of various financial services to businesses and consumers. The company operates in four segments: Banking, Mortgage, Retirement and Benefit Services, and Wealth Management. It offers various deposit products, including demand deposits, interest-bearing transaction accounts, money market accounts, time and savings deposits, checking accounts, and certificates of deposit; and treasury management products, including electronic receivables management, remote deposit capture, cash vault services, merchant services, and other cash management services. The company also provides commercial loans, business term loans, lines of credit, and commercial real estate loans, as well as construction and land development loans; consumer lending products, including residential first mortgage loans; installment loans and lines of credit; and second mortgage loans. In addition, it offers retirement plan administration and investment advisory services, employee stock ownership plan, fiduciary services, payroll, health savings accounts, and other benefit services, as well as individual retirement accounts; and financial planning, investment management, personal and corporate trust, estate administration, and custody services. Further, the company provides debit and credit cards, online banking, mobile banking/wallet, payment, private banking, payroll accounts, flex spending accounts, administration, and government health insurance program services. It offers banking services in North Dakota, Minnesota, and Arizona; and retirement and benefit plans through offices located in Michigan, Minnesota, and Colorado. The company was formerly known as First National Bank North Dakota and changed its name to Alerus Financial Corporation in 2000. Alerus Financial Corporation was founded in 1879 and is headquartered in Grand Forks, North Dakota.

About Pinnacle Financial Partners

Pinnacle Financial Partners, Inc., together with its subsidiaries, operates as the bank holding company for Pinnacle Bank that provides various banking products and services to individuals, businesses, and professional entities in the United States. The company accepts various deposits, including savings, noninterest-bearing and interest-bearing checking, money market, and certificate of deposit accounts; and provides treasury management services, which includes online wire origination, enhanced ACH origination services, positive pay, zero balance and sweep accounts, automated bill pay services, electronic receivables processing, lockbox processing, and merchant card acceptance services. It offers equipment and working capital loans; commercial real estate loans comprising investment properties and business loans; secured and unsecured loans, such as installment and term, lines of credit, and residential first mortgage, as well as home equity loans and home equity lines of credit; and credit cards for consumers and businesses. The company also provides investment products; brokerage and investment advisory programs; and fiduciary and investment services, such as personal trust, investment management, estate administration, endowments, foundations, individual retirement accounts, escrow services, and custody. In addition, it offers insurance agency services primarily in the property and casualty area; merger and acquisition advisory services; and private debt, equity and mezzanine, and other middle-market advisory services. Further, the company provides telephone and online banking, mobile banking, debit and credit cards, direct deposit and remote deposit capture, mobile deposit option, automated teller machine, and cash management services. Pinnacle Financial Partners, Inc. was incorporated in 2000 and is headquartered in Nashville, Tennessee.