State Auto Financial (NASDAQ:STFC) and Donegal Group (NASDAQ:DGICB) are both small-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their institutional ownership, profitability, analyst recommendations, valuation, earnings, risk and dividends.

Dividends

State Auto Financial pays an annual dividend of $0.40 per share and has a dividend yield of 1.2%. Donegal Group pays an annual dividend of $0.50 per share and has a dividend yield of 4.2%. State Auto Financial pays out 33.3% of its earnings in the form of a dividend.

Risk and Volatility

State Auto Financial has a beta of 0.42, indicating that its share price is 58% less volatile than the S&P 500. Comparatively, Donegal Group has a beta of 0.56, indicating that its share price is 44% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and price targets for State Auto Financial and Donegal Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
State Auto Financial 0 1 0 0 2.00
Donegal Group 0 0 0 0 N/A

State Auto Financial currently has a consensus price target of $30.00, indicating a potential downside of 8.37%. Given State Auto Financial’s higher possible upside, analysts clearly believe State Auto Financial is more favorable than Donegal Group.

Earnings & Valuation

This table compares State Auto Financial and Donegal Group’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
State Auto Financial $1.28 billion 1.11 $12.80 million $1.20 27.28
Donegal Group $771.83 million 0.44 -$32.76 million N/A N/A

State Auto Financial has higher revenue and earnings than Donegal Group.

Institutional & Insider Ownership

35.4% of State Auto Financial shares are owned by institutional investors. Comparatively, 1.6% of Donegal Group shares are owned by institutional investors. 2.0% of State Auto Financial shares are owned by company insiders. Comparatively, 7.2% of Donegal Group shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares State Auto Financial and Donegal Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
State Auto Financial 1.00% 6.16% 1.78%
Donegal Group -4.24% -6.55% -1.50%

Summary

State Auto Financial beats Donegal Group on 8 of the 12 factors compared between the two stocks.

About State Auto Financial

State Auto Financial Corporation, through its subsidiaries, engages in writing personal, business, and specialty insurance products. It operates through four segments: Personal Insurance, Commercial Insurance, Specialty Insurance, and Investment Operations. The Personal Insurance segment primarily provides personal automobile, homeowners insurance, and other personal insurance products. The commercial insurance segment primarily provides commercial automobile, commercial multi-peril, fire and allied, general liability, and workers' compensation insurance covering small-to-medium sized commercial insurance market, as well as farm and ranch insurance. The Specialty Insurance segment provides commercial coverages that require specialized product underwriting, claims handling, or risk management services. This segment markets and underwrites specialized property exposures with a focus on catastrophe exposed risks covering property, and general liability; markets and underwrites commercial auto, healthcare, umbrella, property, and general liability coverages; and markets and distributes homogenous risks covering commercial auto, general liability, and property. The Investment Operations segment provides investment management services to affiliated insurance companies. The company markets its products primarily through independent agencies, including retail agencies and wholesale brokers. The company was founded in 1950 and is headquartered in Columbus, Ohio. State Auto Financial Corporation is a subsidiary of State Automobile Mutual Insurance Company.

About Donegal Group

Donegal Group Inc., an insurance holding company, provides property and casualty insurance to businesses and individuals in the Mid-Atlantic, Midwestern, New England, and southern states. It operates through four segments: Investment Function, Personal Lines of Insurance, Commercial Lines of Insurance, and Investment in DFSC. The company offers private passenger automobile policies that provide protection against liability for bodily injury and property damage arising from automobile accidents, as well as protection against loss from damage to automobiles. It also offers homeowners policies, which provide coverage for damage to residences and their contents from a range of perils, including fire, lightning, windstorm, and theft; and liability of the insured arising from injury to other persons or their property. In addition, the company offers commercial automobile policies that provide protection against liability for bodily injury and property damage arising from automobile accidents and protection against loss from damage to automobiles owned by the insured; commercial multi-peril policies that provide protection to businesses against various perils, primarily combining liability and physical damage coverages; and workers' compensation policies, which provide benefits to employees for injuries sustained during employment. Donegal Group Inc., through its interest in Donegal Financial Services Corporation, operates a savings bank. The company markets its insurance products through a network of approximately 2,400 independent insurance agencies. Donegal Group Inc. was founded in 1986 and is headquartered in Marietta, Pennsylvania. Donegal Group Inc. is a subsidiary of Donegal Mutual Insurance Company.

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