Donegal Group (NASDAQ: DGICA) and United Fire Group (NASDAQ:UFCS) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their institutional ownership, risk, dividends, profitability, analyst recommendations, earnings and valuation.
This table compares Donegal Group and United Fire Group’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|United Fire Group||1.49%||1.32%||0.30%|
29.3% of Donegal Group shares are held by institutional investors. Comparatively, 58.5% of United Fire Group shares are held by institutional investors. 11.9% of Donegal Group shares are held by company insiders. Comparatively, 5.8% of United Fire Group shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.
Valuation and Earnings
This table compares Donegal Group and United Fire Group’s top-line revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Donegal Group||$688.42 million||0.71||$30.80 million||$0.57||31.07|
|United Fire Group||$1.14 billion||1.05||$49.90 million||$0.44||109.23|
United Fire Group has higher revenue and earnings than Donegal Group. Donegal Group is trading at a lower price-to-earnings ratio than United Fire Group, indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
Donegal Group has a beta of 0.28, meaning that its share price is 72% less volatile than the S&P 500. Comparatively, United Fire Group has a beta of 0.71, meaning that its share price is 29% less volatile than the S&P 500.
Donegal Group pays an annual dividend of $0.56 per share and has a dividend yield of 3.2%. United Fire Group pays an annual dividend of $1.12 per share and has a dividend yield of 2.3%. Donegal Group pays out 98.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. United Fire Group pays out 254.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Donegal Group is clearly the better dividend stock, given its higher yield and lower payout ratio.
This is a breakdown of current recommendations and price targets for Donegal Group and United Fire Group, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|United Fire Group||0||2||1||0||2.33|
Donegal Group presently has a consensus target price of $19.50, indicating a potential upside of 10.11%. United Fire Group has a consensus target price of $46.33, indicating a potential downside of 3.59%. Given Donegal Group’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Donegal Group is more favorable than United Fire Group.
Donegal Group beats United Fire Group on 10 of the 16 factors compared between the two stocks.
Donegal Group Company Profile
Donegal Group Inc. (DGI) is an insurance holding company whose insurance subsidiaries offer personal and commercial lines of property and casualty insurance. The Company offered its insurance business to various businesses and individuals in 21 Mid-Atlantic, Midwestern, New England and Southern states, as of December 31, 2016. It has four segments: investment function, personal lines of insurance, commercial lines of insurance and investment in Donegal Financial Services Corporation (DFSC). Its insurance operations include two segments: personal lines of insurance and commercial lines of insurance. The personal lines of insurance, which its insurance subsidiaries write consists of private passenger automobile and homeowners insurance. The commercial lines of insurance, which its insurance subsidiaries write consists of commercial automobile, commercial multi-peril and workers’ compensation insurance. It holds interests in DFSC, which is a unitary savings and loan holding company.
United Fire Group Company Profile
United Fire Group, Inc., formerly United Fire & Casualty Company, is engaged in the business of writing property and casualty insurance and life insurance and selling annuities. The Company operates in two segments: property and casualty insurance, and life insurance. The Company’s property and casualty insurance segment consists of commercial lines insurance, including surety bonds, personal lines insurance and assumed insurance. Its life insurance segment consists of deferred and immediate annuities, universal life insurance products and traditional life insurance products. Its life insurance segment consists solely of the operations of United Life Insurance Company. On February 1, 2012, the Company completed a holding company reorganization of United Fire Group, Inc., United Fire & Casualty Company and UFC MergeCo, Inc. On March 28, 2011, the Company acquired Mercer Insurance Group, Inc. (Mercer Insurance Group).
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