Horace Mann Educators (NYSE: HMN) and First American (NYSE:FAF) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, valuation, institutional ownership, earnings, dividends, analyst recommendations and profitability.

Analyst Ratings

This is a summary of recent recommendations for Horace Mann Educators and First American, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Horace Mann Educators 0 1 0 0 2.00
First American 0 1 1 0 2.50

Horace Mann Educators currently has a consensus price target of $37.00, indicating a potential downside of 21.02%. First American has a consensus price target of $49.50, indicating a potential downside of 10.84%. Given First American’s stronger consensus rating and higher probable upside, analysts clearly believe First American is more favorable than Horace Mann Educators.

Valuation and Earnings

This table compares Horace Mann Educators and First American’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Horace Mann Educators $1.13 billion 1.69 $83.76 million $1.54 30.42
First American $5.58 billion 1.10 $342.99 million $2.53 21.94

First American has higher revenue and earnings than Horace Mann Educators. First American is trading at a lower price-to-earnings ratio than Horace Mann Educators, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Horace Mann Educators and First American’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Horace Mann Educators 5.56% 4.94% 0.61%
First American 4.88% 14.30% 4.95%

Dividends

Horace Mann Educators pays an annual dividend of $1.10 per share and has a dividend yield of 2.3%. First American pays an annual dividend of $1.52 per share and has a dividend yield of 2.7%. Horace Mann Educators pays out 71.4% of its earnings in the form of a dividend. First American pays out 60.1% 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. Horace Mann Educators has raised its dividend for 8 consecutive years and First American has raised its dividend for 5 consecutive years. First American is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

98.3% of Horace Mann Educators shares are owned by institutional investors. Comparatively, 83.4% of First American shares are owned by institutional investors. 2.1% of Horace Mann Educators shares are owned by insiders. Comparatively, 3.1% of First American shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Risk and Volatility

Horace Mann Educators has a beta of 1.17, indicating that its share price is 17% more volatile than the S&P 500. Comparatively, First American has a beta of 0.74, indicating that its share price is 26% less volatile than the S&P 500.

Summary

First American beats Horace Mann Educators on 11 of the 17 factors compared between the two stocks.

Horace Mann Educators Company Profile

Horace Mann Educators Corporation (HMEC) is an insurance holding company. Through its subsidiaries, HMEC markets and underwrites personal lines of property and casualty (primarily personal lines automobile and homeowners) insurance, retirement annuities (primarily tax-qualified products) and life insurance in the United States. The Company’s operating segments include Property and Casualty segment, comprising primarily personal lines automobile and homeowners products; Retirement segment, comprising primarily tax-qualified fixed and variable annuities; Life segment life insurance, and Corporate and Other. It markets and services its products through a sales force of full-time agents supported by its Customer Contact Center. These agents sell HMEC’s products and limited additional third-party vendor products. As of December 31, 2016, its property and casualty subsidiaries and its life insurance subsidiary were licensed to write business in over 48 states and the District of Columbia.

First American Company Profile

First American Financial Corporation, through its subsidiaries, is engaged in the business of providing financial services. The Company operates through the title insurance and services segment, and specialty insurance segment. The title insurance and services segment provides title insurance, closing and/or escrow services and similar or related services domestically and internationally in connection with residential and commercial real estate transactions. The title insurance and services segment also provides products, services and solutions involving the use of property related data, including data derived from its database, which are designed to manage risk or otherwise facilitate real estate transactions. The specialty insurance segment issues property and casualty insurance policies and sells home warranty products to residential homeowners and renters for liability losses and typical hazards, such as fire, theft, vandalism and other types of property damage.

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