Anthem (NYSE: ANTM) and Aetna (NYSE:AET) are both large-cap medical companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, valuation, analyst recommendations, risk, institutional ownership, profitability and earnings.

Valuation and Earnings

This table compares Anthem and Aetna’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Anthem $88.03 billion 0.54 $5.75 billion $10.56 17.18
Aetna $62.20 billion 0.83 $6.06 billion $4.58 34.07

Aetna has higher revenue, but lower earnings than Anthem. Anthem is trading at a lower price-to-earnings ratio than Aetna, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

87.7% of Anthem shares are owned by institutional investors. Comparatively, 89.5% of Aetna shares are owned by institutional investors. 0.4% of Anthem shares are owned by company insiders. Comparatively, 1.1% of Aetna shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Anthem and Aetna, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Anthem 0 9 8 0 2.47
Aetna 0 5 14 0 2.74

Anthem presently has a consensus target price of $181.31, suggesting a potential downside of 0.07%. Aetna has a consensus target price of $160.63, suggesting a potential upside of 2.94%. Given Aetna’s stronger consensus rating and higher possible upside, analysts plainly believe Aetna is more favorable than Anthem.

Dividends

Anthem pays an annual dividend of $2.80 per share and has a dividend yield of 1.5%. Aetna pays an annual dividend of $2.00 per share and has a dividend yield of 1.3%. Anthem pays out 26.5% of its earnings in the form of a dividend. Aetna pays out 43.7% 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. Aetna has raised its dividend for 2 consecutive years. Anthem is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk & Volatility

Anthem has a beta of 0.7, indicating that its stock price is 30% less volatile than the S&P 500. Comparatively, Aetna has a beta of 0.53, indicating that its stock price is 47% less volatile than the S&P 500.

Profitability

This table compares Anthem and Aetna’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Anthem 3.24% 12.93% 4.96%
Aetna 2.52% 20.52% 5.35%

Summary

Aetna beats Anthem on 11 of the 17 factors compared between the two stocks.

Anthem Company Profile

Anthem, Inc. is a health benefits company. The Company operates through three segments: Commercial and Specialty Business, Government Business and Other. It offers a spectrum of network-based managed care plans to large and small employer, individual, Medicaid and Medicare markets. Its managed care plans include preferred provider organizations; health maintenance organizations; point-of-service plans; indemnity plans and other hybrid plans, including consumer-driven health plans; and hospital only and limited benefit products. It also provides an array of managed care services to self-funded customers, including claims processing, underwriting, stop loss insurance, actuarial services, provider network access, medical cost management, disease management, wellness programs and other administrative services. It provides an array of specialty and other insurance products and services, such as dental, vision, life and disability insurance benefits and radiology benefit management.

Aetna Company Profile

Aetna Inc. is a diversified healthcare benefits company. The Company operates through three segments: Health Care, Group Insurance and Large Case Pensions. It offers a range of traditional, voluntary and consumer-directed health insurance products and related services, including medical, pharmacy, dental, behavioral health, group life and disability plans, medical management capabilities, Medicaid healthcare management services, Medicare Advantage and Medicare Supplement plans, workers’ compensation administrative services and health information technology (HIT) products and services. The Health Care segment consists of medical, pharmacy benefit management services, dental, behavioral health and vision plans offered on both an Insured basis and an employer-funded basis, and emerging businesses products and services. The Group Insurance segment includes group life insurance and group disability products. Its products are offered on an Insured basis.

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