EMC Insurance Group (NASDAQ: EMCI) and Hallmark Financial Services (NASDAQ:HALL) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, profitability, valuation, analyst recommendations, risk, institutional ownership and dividends.

Institutional and Insider Ownership

28.0% of EMC Insurance Group shares are held by institutional investors. Comparatively, 65.0% of Hallmark Financial Services shares are held by institutional investors. 4.5% of EMC Insurance Group shares are held by company insiders. Comparatively, 28.7% of Hallmark Financial Services shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares EMC Insurance Group and Hallmark Financial Services’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
EMC Insurance Group 5.32% 4.99% 1.74%
Hallmark Financial Services -1.19% -0.42% -0.09%

Risk and Volatility

EMC Insurance Group has a beta of 0.99, meaning that its share price is 1% less volatile than the S&P 500. Comparatively, Hallmark Financial Services has a beta of 0.82, meaning that its share price is 18% less volatile than the S&P 500.

Earnings and Valuation

This table compares EMC Insurance Group and Hallmark Financial Services’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
EMC Insurance Group $640.91 million 0.97 $46.20 million $1.62 17.99
Hallmark Financial Services $375.95 million 0.53 $6.52 million ($0.26) -41.88

EMC Insurance Group has higher revenue and earnings than Hallmark Financial Services. Hallmark Financial Services is trading at a lower price-to-earnings ratio than EMC Insurance Group, indicating that it is currently the more affordable of the two stocks.

Dividends

EMC Insurance Group pays an annual dividend of $0.88 per share and has a dividend yield of 3.0%. Hallmark Financial Services does not pay a dividend. EMC Insurance Group pays out 54.3% of its earnings in the form of a dividend.

Analyst Ratings

This is a breakdown of recent ratings for EMC Insurance Group and Hallmark Financial Services, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
EMC Insurance Group 0 1 0 0 2.00
Hallmark Financial Services 0 0 0 0 N/A

EMC Insurance Group currently has a consensus price target of $32.00, suggesting a potential upside of 9.81%. Given EMC Insurance Group’s higher possible upside, equities research analysts plainly believe EMC Insurance Group is more favorable than Hallmark Financial Services.

Summary

EMC Insurance Group beats Hallmark Financial Services on 10 of the 13 factors compared between the two stocks.

About EMC Insurance Group

EMC Insurance Group Inc. is an insurance holding company. The Company operates through two segments: Property and Casualty Insurance and Reinsurance segment. It conducts its property and casualty insurance operations through its subsidiaries, including EMCASCO Insurance Company, Illinois EMCASCO Insurance Company and Dakota Fire Insurance Company, and its reinsurance operations through its subsidiary, EMC Reinsurance Company. The Company focuses on the sale of commercial lines of property and casualty insurance to small and medium-sized businesses. The Company offered its insurance products in 41 states, as of December 31, 2016. The Company is owned by Employers Mutual Casualty Company (Employers Mutual), a multiple-line property and casualty insurance company. The Company’s insurance agency, EMC Underwriters, LLC (EMC Underwriters), specializes in marketing excess and surplus lines of insurance.

About Hallmark Financial Services

Hallmark Financial Services, Inc. is an insurance holding company. The Company markets, distributes, underwrites and services its property/casualty insurance products to businesses and individuals. Its business involves marketing, distributing, underwriting and servicing insurance products, as well as providing other insurance related services. Its segments include Standard Commercial Segment, Specialty Commercial Segment and Personal Segment. The Company’s Standard Commercial P&C operating unit primarily underwrites low-severity, short-tailed commercial property/casualty insurance products in the standard market. The Company reinsures a portion of the risk it underwrites in order to control the exposure to losses and to protect capital resources. Its Workers Compensation operating unit specializes in small and middle market workers compensation business. Its Specialty Commercial operating unit offers general aviation and satellite launch insurance products and services.

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