Alleghany Corporation (NYSE: Y) and American Financial Group (NYSE:AFG) are both mid-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, institutional ownership, analyst recommendations, dividends, profitability, risk and earnings.

Volatility & Risk

Alleghany Corporation has a beta of 0.92, meaning that its stock price is 8% less volatile than the S&P 500. Comparatively, American Financial Group has a beta of 0.83, meaning that its stock price is 17% less volatile than the S&P 500.

Insider and Institutional Ownership

81.8% of Alleghany Corporation shares are owned by institutional investors. Comparatively, 62.7% of American Financial Group shares are owned by institutional investors. 4.0% of Alleghany Corporation shares are owned by insiders. Comparatively, 13.7% of American Financial Group shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of current recommendations for Alleghany Corporation and American Financial Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Alleghany Corporation 0 1 0 0 2.00
American Financial Group 0 1 1 0 2.50

American Financial Group has a consensus price target of $83.00, indicating a potential downside of 18.31%. Given American Financial Group’s stronger consensus rating and higher possible upside, analysts clearly believe American Financial Group is more favorable than Alleghany Corporation.

Dividends

American Financial Group pays an annual dividend of $1.25 per share and has a dividend yield of 1.2%. Alleghany Corporation does not pay a dividend. American Financial Group pays out 14.1% of its earnings in the form of a dividend. American Financial Group has raised its dividend for 11 consecutive years.

Valuation and Earnings

This table compares Alleghany Corporation and American Financial Group’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Alleghany Corporation $6.16 billion 1.40 $888.24 million $30.86 18.15
American Financial Group $6.49 billion 1.38 $1.16 billion $8.89 11.43

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

Profitability

This table compares Alleghany Corporation and American Financial Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Alleghany Corporation 7.74% 5.70% 1.93%
American Financial Group 11.89% 11.66% 1.07%

Summary

American Financial Group beats Alleghany Corporation on 10 of the 17 factors compared between the two stocks.

Alleghany Corporation Company Profile

Alleghany Corporation is an insurance holding company. The Company, through its subsidiary Alleghany Insurance Holdings LLC (AIHL) and its subsidiaries, is engaged in the property and casualty insurance business. AIHL’s insurance operations are conducted by its subsidiaries RSUI Group, Inc. (RSUI), CapSpecialty, Inc. (CapSpecialty) and Pacific Compensation Corporation (PacificComp). Its segments include reinsurance and insurance. Its reinsurance segment consists of property and casualty reinsurance operations conducted by Transatlantic Holdings, Inc. reinsurance operating subsidiaries. Its insurance segment consists of property and casualty insurance operations conducted by AIHL through its insurance operating subsidiaries RSUI, CapSpecialty and PacificComp. AIHL Re LLC, which is a captive reinsurance company, provides reinsurance to its insurance operating subsidiaries and affiliates.

American Financial Group Company Profile

American Financial Group, Inc. (AFG) is a holding company engaged primarily in property and casualty insurance businesses. The Company, through Great American Insurance Group, focuses on commercial products for businesses, and is engaged in the sale of fixed and fixed-indexed annuities in the retail, financial institutions and education markets. It has four segments: Property and casualty insurance, Annuity, Run-off long-term care and life, and Other. It reports its property and casualty insurance business in specialty sub-segments, including Property and transportation, Specialty casualty and Specialty financial. AFG sells traditional fixed and fixed-indexed annuities in the retail, financial institutions and education markets through independent producers and through direct relationships with certain financial institutions. AFG also sells single premium annuities in financial institutions through direct relationships with certain banks and through independent agents and brokers.

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