The Hanover Insurance Group (NYSE: THG) and State Auto Financial Corporation (NASDAQ:STFC) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their risk, profitability, valuation, analyst recommendations, dividends, earnings and institutional ownership.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for The Hanover Insurance Group and State Auto Financial Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
The Hanover Insurance Group 0 1 2 0 2.67
State Auto Financial Corporation 0 3 0 0 2.00

The Hanover Insurance Group presently has a consensus target price of $91.33, suggesting a potential downside of 1.00%. State Auto Financial Corporation has a consensus target price of $26.00, suggesting a potential upside of 7.53%. Given State Auto Financial Corporation’s higher possible upside, analysts plainly believe State Auto Financial Corporation is more favorable than The Hanover Insurance Group.

Risk and Volatility

The Hanover Insurance Group has a beta of 1.14, indicating that its share price is 14% more volatile than the S&P 500. Comparatively, State Auto Financial Corporation has a beta of 0.9, indicating that its share price is 10% less volatile than the S&P 500.

Profitability

This table compares The Hanover Insurance Group and State Auto Financial Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
The Hanover Insurance Group 3.95% 5.83% 1.19%
State Auto Financial Corporation 3.33% 1.46% 0.44%

Earnings and Valuation

This table compares The Hanover Insurance Group and State Auto Financial Corporation’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
The Hanover Insurance Group $5.02 billion 0.78 $342.30 million $4.62 19.97
State Auto Financial Corporation $1.42 billion 0.72 $66.20 million $1.12 21.59

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

Institutional and Insider Ownership

84.4% of The Hanover Insurance Group shares are held by institutional investors. Comparatively, 32.9% of State Auto Financial Corporation shares are held by institutional investors. 1.1% of The Hanover Insurance Group shares are held by company insiders. Comparatively, 1.5% of State Auto Financial Corporation shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Dividends

The Hanover Insurance Group pays an annual dividend of $2.00 per share and has a dividend yield of 2.2%. State Auto Financial Corporation pays an annual dividend of $0.40 per share and has a dividend yield of 1.7%. The Hanover Insurance Group pays out 43.3% of its earnings in the form of a dividend. State Auto Financial Corporation pays out 35.7% 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. State Auto Financial Corporation has raised its dividend for 5 consecutive years.

Summary

The Hanover Insurance Group beats State Auto Financial Corporation on 12 of the 17 factors compared between the two stocks.

About The Hanover Insurance Group

The Hanover Insurance Group, Inc. is a holding company. The Company is engaged in providing property and casualty insurance products and services. The Company has four segments: Commercial Lines, Personal Lines, Chaucer and Other. It markets its domestic products and services through independent agents and brokers in the United States, and conducts business internationally through a subsidiary, Chaucer Holdings Limited, which operates through the Society and Corporation of Lloyd’s (Lloyd’s). Its Commercial Lines product suite provides agents and customers with products designed for small, middle and specialized markets. Its Personal Lines coverages include other personal lines, which consist of umbrella and fire, among others. The Chaucer segment consists of international business written through Lloyd’s, including marine and aviation, and property. The Other segment consists of Opus Investment Management, Inc. (Opus), which provides investment advisory services to affiliates.

About State Auto Financial Corporation

State Auto Financial Corporation is a property and casualty insurance holding company. The Company is engaged in writing personal, business and specialty insurance. Its segments include Personal Insurance Segment, Commercial Insurance Segment and Specialty Insurance Segment. Its Personal Insurance Segment include personal auto, homeowners and other personal; Commercial Insurance Segment include commercial auto, small commercial package, middle market commercial, workers’ compensation and other commercial, and Specialty Insurance Segment include Excess & Surplus (E&S) property, E&S casualty and programs. State Auto Financial’s subsidiaries include State Auto Property & Casualty Insurance Company (State Auto P&C), Milbank Insurance Company (Milbank) and State Auto Insurance Company of Ohio (SA Ohio), each of which is a property and casualty insurance company, and Stateco Financial Services, Inc., (Stateco), which provides investment management services to affiliated insurance companies.

Receive News & Ratings for The Hanover Insurance Group Inc. Daily - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for The Hanover Insurance Group Inc. and related companies with MarketBeat.com's FREE daily email newsletter.