Federated National (NASDAQ: FNHC) and United Insurance (NASDAQ:UIHC) are both small-cap financials companies, but which is the superior stock? We will contrast the two companies based on the strength of their institutional ownership, dividends, analyst recommendations, profitability, risk, valuation and earnings.

Profitability

This table compares Federated National and United Insurance’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Federated National -2.54% -4.03% -1.06%
United Insurance -4.54% -2.29% -0.58%

Analyst Ratings

This is a breakdown of current ratings and target prices for Federated National and United Insurance, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Federated National 0 0 1 0 3.00
United Insurance 0 1 2 1 3.00

Federated National presently has a consensus price target of $21.00, indicating a potential upside of 50.75%. United Insurance has a consensus price target of $18.00, indicating a potential upside of 13.14%. Given Federated National’s higher possible upside, equities research analysts plainly believe Federated National is more favorable than United Insurance.

Earnings & Valuation

This table compares Federated National and United Insurance’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Federated National $316.38 million 0.57 -$190,000.00 ($0.70) -19.90
United Insurance $487.12 million 1.40 $5.69 million ($0.80) -19.89

United Insurance has higher revenue and earnings than Federated National. Federated National is trading at a lower price-to-earnings ratio than United Insurance, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Federated National has a beta of 1.62, indicating that its stock price is 62% more volatile than the S&P 500. Comparatively, United Insurance has a beta of 1.54, indicating that its stock price is 54% more volatile than the S&P 500.

Dividends

Federated National pays an annual dividend of $0.32 per share and has a dividend yield of 2.3%. United Insurance pays an annual dividend of $0.24 per share and has a dividend yield of 1.5%. Federated National pays out -45.7% of its earnings in the form of a dividend. United Insurance pays out -30.0% 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. Federated National is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

61.5% of Federated National shares are held by institutional investors. Comparatively, 28.3% of United Insurance shares are held by institutional investors. 10.8% of Federated National shares are held by company insiders. Comparatively, 22.6% of United Insurance shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Summary

United Insurance beats Federated National on 8 of the 15 factors compared between the two stocks.

About Federated National

Federated National Holding Company (FNHC) is an insurance holding company that controls all steps in the insurance underwriting, distribution and claims processes through its subsidiaries and its contractual relationships with its independent agents and general agents. The Company is authorized to underwrite homeowners’ multi-peril (homeowners), commercial general liability, federal flood, personal auto and various other lines of insurance in Florida and various other states. The Company markets, distributes and services its own and third-party insurers’ products and its other services through a network of independent agents. The Company’s insurance lines of business include Homeowners’ Property and Casualty Insurance, Commercial General Liability, Personal Automobile and Flood. FNIC and MNIC underwrite homeowners’ insurance in Florida, and FNIC underwrites insurance in Alabama, Louisiana and South Carolina. Alabama and Louisiana.

About United Insurance

United Insurance Holdings Corp. is a property and casualty insurance holding company that sources, writes and services residential property and casualty insurance policies using a network of agents and a group of insurance subsidiaries. The Company’s insurance subsidiary is United Property & Casualty Insurance Company. Its other subsidiaries include United Insurance Management, L.C., the managing general agent that manages substantially all aspects of United Property & Casualty Insurance Company’s business; Skyway Claims Services, LLC, which provides services to its insurance affiliate; UPC Re, which provides a portion of the reinsurance protection purchased by its insurance affiliate. The Company’s principal product is homeowners’ insurance, which it offers in Connecticut, Florida, Georgia, Hawaii, Louisiana, Massachusetts, New Jersey, North Carolina, Rhode Island, South Carolina and Texas.

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