American Equity Investment Life Holding Company (NYSE: AEL) and Primerica (NYSE:PRI) are both mid-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their valuation, profitabiliy, dividends, analyst recommendations, institutional ownership, earnings and risk.

Insider and Institutional Ownership

93.5% of American Equity Investment Life Holding Company shares are owned by institutional investors. Comparatively, 97.5% of Primerica shares are owned by institutional investors. 4.1% of American Equity Investment Life Holding Company shares are owned by company insiders. Comparatively, 1.2% of Primerica shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Profitability

This table compares American Equity Investment Life Holding Company and Primerica’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Equity Investment Life Holding Company 6.67% 6.33% 0.29%
Primerica 14.49% 18.22% 1.95%

Dividends

American Equity Investment Life Holding Company pays an annual dividend of $0.24 per share and has a dividend yield of 0.9%. Primerica pays an annual dividend of $0.76 per share and has a dividend yield of 1.0%. American Equity Investment Life Holding Company pays out 11.8% of its earnings in the form of a dividend. Primerica pays out 15.9% 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. American Equity Investment Life Holding Company has raised its dividend for 6 consecutive years and Primerica has raised its dividend for 4 consecutive years.

Volatility and Risk

American Equity Investment Life Holding Company has a beta of 2.5, suggesting that its share price is 150% more volatile than the S&P 500. Comparatively, Primerica has a beta of 1.13, suggesting that its share price is 13% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings for American Equity Investment Life Holding Company and Primerica, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Equity Investment Life Holding Company 0 5 2 0 2.29
Primerica 0 4 1 0 2.20

American Equity Investment Life Holding Company presently has a consensus price target of $23.86, indicating a potential downside of 12.68%. Primerica has a consensus price target of $84.67, indicating a potential upside of 9.46%. Given Primerica’s higher probable upside, analysts plainly believe Primerica is more favorable than American Equity Investment Life Holding Company.

Valuation & Earnings

This table compares American Equity Investment Life Holding Company and Primerica’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
American Equity Investment Life Holding Company $2.73 billion 0.89 $324.27 million $2.04 13.39
Primerica $1.58 billion 2.23 $406.18 million $4.77 16.22

Primerica has higher revenue, but lower earnings than American Equity Investment Life Holding Company. American Equity Investment Life Holding Company is trading at a lower price-to-earnings ratio than Primerica, indicating that it is currently the more affordable of the two stocks.

Summary

Primerica beats American Equity Investment Life Holding Company on 10 of the 17 factors compared between the two stocks.

American Equity Investment Life Holding Company Company Profile

American Equity Investment Life Holding Company is engaged in the development and sale of fixed index and fixed rate annuity products. The Company issues fixed annuity and life insurance products through its life insurance subsidiaries, American Equity Investment Life Insurance Company, American Equity Investment Life Insurance Company of New York and Eagle Life Insurance Company. Its target market includes the group of individuals aged 45 to 75 seeking to accumulate tax-deferred savings or create guaranteed lifetime income. The Company distributes through a range of distribution channels, including independent agents, broker/dealers, banks and registered investment advisors. Its product types include fixed index annuities, annual reset fixed rate annuities, multi-year fixed rate annuities and single premium immediate annuities. Its life insurance products include traditional ordinary and term, universal life and other interest-sensitive life insurance products.

Primerica Company Profile

Primerica Inc. (Primerica) is a distributor of financial products to middle-income households in the United States and Canada. The Company operates through three segments: Term Life Insurance, Investment and Savings Products, and Corporate and Other Distributed Products. The Term Life Insurance segment includes underwriting profits on its in-force book of term life insurance policies, net of reinsurance, which are underwritten by its life insurance company subsidiaries. The Investment and Savings Products segment includes retail and managed mutual funds, and annuities distributed through licensed broker-dealer subsidiaries and includes segregated funds, an individual annuity savings product that it underwrites in Canada through Primerica Life Insurance Company of Canada (Primerica Life Canada). In the United States, it distributes mutual fund and annuity products of various third-party companies. It also earns fees for account servicing on a subset of the mutual funds it distributes.

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