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

Dividends

State Auto Financial Corporation pays an annual dividend of $0.40 per share and has a dividend yield of 1.7%. Essent Group does not pay a dividend. State Auto Financial Corporation pays out 35.7% of its earnings in the form of a dividend.

Institutional & Insider Ownership

81.4% of Essent Group shares are owned by institutional investors. Comparatively, 32.9% of State Auto Financial Corporation shares are owned by institutional investors. 18.1% of Essent Group shares are owned by company insiders. Comparatively, 1.5% of State Auto Financial Corporation shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Essent 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
Essent Group $512.83 million 6.67 $362.45 million $2.82 12.99
State Auto Financial Corporation $1.42 billion 0.72 $66.20 million $1.12 21.59

Essent Group has higher revenue, but lower earnings than State Auto Financial Corporation. Essent 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.

Volatility and Risk

Essent Group has a beta of 1.14, suggesting that its stock price is 14% more volatile than the S&P 500. Comparatively, State Auto Financial Corporation has a beta of 0.9, suggesting that its stock price is 10% less volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Essent Group 50.92% 18.77% 13.32%
State Auto Financial Corporation 3.33% 1.46% 0.44%

Analyst Recommendations

This is a summary of recent recommendations for Essent Group and State Auto Financial Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Essent Group 0 2 4 0 2.67
State Auto Financial Corporation 0 3 0 0 2.00

Essent Group currently has a consensus price target of $43.80, indicating a potential upside of 19.61%. State Auto Financial Corporation has a consensus price target of $26.00, indicating a potential upside of 7.53%. Given Essent Group’s stronger consensus rating and higher possible upside, research analysts plainly believe Essent Group is more favorable than State Auto Financial Corporation.

Summary

Essent Group beats State Auto Financial Corporation on 13 of the 16 factors compared between the two stocks.

About Essent Group

Essent Group Ltd. is a private mortgage insurance company. The Company is engaged in offering private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. Its products and services include mortgage insurance, contract underwriting, and Bermuda-based insurance and reinsurance. The Company’s primary mortgage insurance is offered to customers on individual loans at the time of origination on a flow basis, but can also be written in bulk transactions. Its pool insurance provides additional credit enhancement for certain secondary market and other mortgage transactions. The primary mortgage insurance operations were conducted through Essent Guaranty, Inc. which is a mortgage insurer licensed to write mortgage insurance in all 50 states and the District of Columbia, as of December 31, 2016. It offers primary mortgage insurance, pool insurance and master policy. It provides contract underwriting services through CUW Solutions, LLC.

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.

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