Cincinnati Financial Corporation (NASDAQ: CINF) and Alleghany Corporation (NYSE:Y) are both mid-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, risk, dividends, analyst recommendations, profitability, institutional ownership and valuation.

Insider & Institutional Ownership

63.1% of Cincinnati Financial Corporation shares are held by institutional investors. Comparatively, 81.8% of Alleghany Corporation shares are held by institutional investors. 9.3% of Cincinnati Financial Corporation shares are held by company insiders. Comparatively, 4.0% of Alleghany Corporation shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Earnings and Valuation

This table compares Cincinnati Financial Corporation and Alleghany Corporation’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Cincinnati Financial Corporation $5.62 billion 2.22 $889.00 million $3.49 21.83
Alleghany Corporation $6.16 billion 1.40 $888.24 million $30.86 18.18

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

Profitability

This table compares Cincinnati Financial Corporation and Alleghany Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cincinnati Financial Corporation 10.33% 6.57% 2.28%
Alleghany Corporation 7.74% 5.70% 1.93%

Dividends

Cincinnati Financial Corporation pays an annual dividend of $2.00 per share and has a dividend yield of 2.6%. Alleghany Corporation does not pay a dividend. Cincinnati Financial Corporation pays out 57.3% of its earnings in the form of a dividend. Alleghany Corporation has increased its dividend for 56 consecutive years.

Volatility & Risk

Cincinnati Financial Corporation has a beta of 0.9, indicating that its share price is 10% less volatile than the S&P 500. Comparatively, Alleghany Corporation has a beta of 0.94, indicating that its share price is 6% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Cincinnati Financial Corporation and Alleghany Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cincinnati Financial Corporation 0 4 1 0 2.20
Alleghany Corporation 0 1 1 0 2.50

Cincinnati Financial Corporation presently has a consensus target price of $77.33, indicating a potential upside of 1.50%. Alleghany Corporation has a consensus target price of $625.00, indicating a potential upside of 11.42%. Given Alleghany Corporation’s stronger consensus rating and higher possible upside, analysts clearly believe Alleghany Corporation is more favorable than Cincinnati Financial Corporation.

About Cincinnati Financial Corporation

Cincinnati Financial Corporation is an insurance holding company. It operates through five segments: Commercial lines insurance, Personal lines insurance, Excess and surplus lines insurance, and Life insurance and Investments. Its Commercial Lines Insurance Segment provides five commercial business lines: commercial casualty, commercial property, commercial auto, workers’ compensation and other commercial lines. Its personal lines property insurance segment writes personal lines coverage in accounts that include both auto and homeowner coverages, as well as coverages that are part of its other personal business line. The excess and surplus lines Insurance segment covers business risks with characteristics, such as the nature of the business or its claim history that are difficult to profitably insure in the standard commercial lines market. The life insurance business lines include term life insurance, universal life insurance, worksite products and whole life insurance.

About Alleghany Corporation

Alleghany Corporation is an insurance holding company. The Company, through its subsidiary Alleghany Insurance Holdings LLC (AIHL) and its subsidiaries, is engaged in the property and casualty insurance business. AIHL’s insurance operations are conducted by its subsidiaries RSUI Group, Inc. (RSUI), CapSpecialty, Inc. (CapSpecialty) and Pacific Compensation Corporation (PacificComp). Its segments include reinsurance and insurance. Its reinsurance segment consists of property and casualty reinsurance operations conducted by Transatlantic Holdings, Inc. reinsurance operating subsidiaries. Its insurance segment consists of property and casualty insurance operations conducted by AIHL through its insurance operating subsidiaries RSUI, CapSpecialty and PacificComp. AIHL Re LLC, which is a captive reinsurance company, provides reinsurance to its insurance operating subsidiaries and affiliates.

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