ProAssurance (NYSE: PRA) and Federated National (NASDAQ:FNHC) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, risk, institutional ownership, dividends, analyst recommendations, valuation and earnings.

Profitability

This table compares ProAssurance and Federated National’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
ProAssurance 16.18% 6.75% 2.50%
Federated National -2.54% -4.03% -1.06%

Volatility and Risk

ProAssurance has a beta of 0.58, suggesting that its share price is 42% less volatile than the S&P 500. Comparatively, Federated National has a beta of 1.53, suggesting that its share price is 53% more volatile than the S&P 500.

Dividends

ProAssurance pays an annual dividend of $1.24 per share and has a dividend yield of 2.0%. Federated National pays an annual dividend of $0.32 per share and has a dividend yield of 2.2%. ProAssurance pays out 46.1% of its earnings in the form of a dividend. Federated National pays out -45.7% 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. Federated National is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of current recommendations and price targets for ProAssurance and Federated National, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
ProAssurance 0 4 0 0 2.00
Federated National 0 0 1 0 3.00

ProAssurance currently has a consensus target price of $58.33, indicating a potential downside of 4.14%. Federated National has a consensus target price of $21.00, indicating a potential upside of 46.96%. Given Federated National’s stronger consensus rating and higher probable upside, analysts plainly believe Federated National is more favorable than ProAssurance.

Valuation & Earnings

This table compares ProAssurance and Federated National’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
ProAssurance $870.21 million 3.74 $151.08 million $2.69 22.62
Federated National $316.38 million 0.59 -$190,000.00 ($0.70) -20.41

ProAssurance has higher revenue and earnings than Federated National. Federated National is trading at a lower price-to-earnings ratio than ProAssurance, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

80.2% of ProAssurance shares are held by institutional investors. Comparatively, 62.3% of Federated National shares are held by institutional investors. 1.8% of ProAssurance shares are held by insiders. Comparatively, 10.8% of Federated National shares are held by 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.

Summary

ProAssurance beats Federated National on 8 of the 15 factors compared between the two stocks.

ProAssurance Company Profile

ProAssurance Corporation (ProAssurance) is a holding company for property and casualty insurance companies. The Company provides professional liability insurance for healthcare professionals and facilities, professional liability insurance for attorneys, liability insurance for medical technology and life sciences risks, and workers’ compensation insurance. The Company operates through four segments. The Specialty property and casualty segment includes the Company’s professional liability business, and medical technology and life sciences business. The Workers’ compensation segment includes its workers’ compensation business. Lloyd’s Syndicate 1729 (Syndicate 1729) segment includes business of Syndicate 1729, which underwrites risks over a range of property and casualty insurance and reinsurance lines. The Corporate segment includes the Company’s investment operations managed at the corporate level and non-premium revenues generated outside of its insurance entities.

Federated National Company Profile

Federated National Holding Company (FNHC) is an insurance holding company that controls all steps in the insurance underwriting, distribution and claims processes through its subsidiaries and its contractual relationships with its independent agents and general agents. The Company is authorized to underwrite homeowners’ multi-peril (homeowners), commercial general liability, federal flood, personal auto and various other lines of insurance in Florida and various other states. The Company markets, distributes and services its own and third-party insurers’ products and its other services through a network of independent agents. The Company’s insurance lines of business include Homeowners’ Property and Casualty Insurance, Commercial General Liability, Personal Automobile and Flood. FNIC and MNIC underwrite homeowners’ insurance in Florida, and FNIC underwrites insurance in Alabama, Louisiana and South Carolina. Alabama and Louisiana.

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