Safety Insurance Group (NASDAQ: SAFT) and Fanhua (NASDAQ:FANH) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, dividends, risk, profitabiliy, valuation and earnings.

Dividends

Safety Insurance Group pays an annual dividend of $2.80 per share and has a dividend yield of 4.0%. Fanhua pays an annual dividend of $0.10 per share and has a dividend yield of 1.1%. Safety Insurance Group pays out 66.4% of its earnings in the form of a dividend. Fanhua pays out 19.6% 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.

Risk and Volatility

Safety Insurance Group has a beta of 0.76, indicating that its stock price is 24% less volatile than the S&P 500. Comparatively, Fanhua has a beta of 0.97, indicating that its stock price is 3% less volatile than the S&P 500.

Institutional & Insider Ownership

79.6% of Safety Insurance Group shares are owned by institutional investors. Comparatively, 8.5% of Fanhua shares are owned by institutional investors. 6.2% of Safety Insurance Group shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Safety Insurance Group and Fanhua’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Safety Insurance Group 7.75% 9.42% 3.61%
Fanhua 3.92% 6.11% 4.85%

Earnings & Valuation

This table compares Safety Insurance Group and Fanhua’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Safety Insurance Group $824.76 million 1.28 $107.60 million $4.22 16.46
Fanhua $767.14 million 0.68 $20.21 million $0.51 17.51

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

Analyst Recommendations

This is a breakdown of current ratings and target prices for Safety Insurance Group and Fanhua, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Safety Insurance Group 0 1 0 0 2.00
Fanhua 0 0 0 0 N/A

Safety Insurance Group currently has a consensus target price of $60.00, indicating a potential downside of 13.61%. Given Safety Insurance Group’s higher possible upside, research analysts plainly believe Safety Insurance Group is more favorable than Fanhua.

Summary

Safety Insurance Group beats Fanhua on 10 of the 14 factors compared between the two stocks.

About Safety Insurance Group

Safety Insurance Group, Inc. is a provider of private passenger automobile insurance. The Company offers a portfolio of property and casualty insurance products. The Company is engaged in property and casualty insurance operations. The Company’s product line includes private passenger automobile, commercial automobile, homeowners, business owners’ policies, personal umbrella, dwelling fire, commercial umbrella, inland marine and watercraft. The Company operates through its insurance company subsidiaries, Safety Insurance Company, Safety Indemnity Insurance Company, and Safety Property and Casualty Insurance Company. Private passenger automobile policies provide coverage for bodily injury and property damage to others, no-fault personal injury coverage for the insured/insured’s car occupants, and physical damage coverage for an insured’s own vehicle for collision or other perils. Commercial automobile policies provide coverage for bodily injury and property damage to others.

About Fanhua

Fanhua Inc., formerly CNinsure Inc., is an independent online-to-offline financial services provider in China. The Company distributes a range of property, casualty and life insurance products underwritten by domestic and foreign insurance companies operating in China to individual and institutional customers, and provides insurance claims adjusting services. Its segments include insurance agency, which provides a range of property, casualty and life insurance products to individual customers; insurance brokerage, which provides commercial lines of property and casualty insurance, group life insurance programs and risk management consulting services to businesses and reinsurance brokerage services to insurance companies, and claims adjusting, which provides claims adjusting services to self-insured entities or insurance companies that choose to outsource some or all of their claims adjustment functions. The Company’s distribution and service network covers over 29 provinces in China.

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