Critical Analysis: XL Group (XL) vs. Donegal Group (DGICA)

XL Group (NYSE: XL) and Donegal Group (NASDAQ:DGICA) are both finance companies, but which is the superior business? We will compare the two businesses based on the strength of their earnings, profitability, analyst recommendations, dividends, risk, valuation and institutional ownership.

Profitability

This table compares XL Group and Donegal Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
XL Group -2.51% -4.03% -0.83%
Donegal Group 2.13% 2.81% 0.75%

Earnings & Valuation

This table compares XL Group and Donegal Group’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
XL Group $10.55 billion 0.86 $440.96 million ($1.23) -28.65
Donegal Group $688.42 million 0.70 $30.80 million $0.57 30.61

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

Risk & Volatility

XL Group has a beta of 1, indicating that its stock price has a similar volatility profile to the S&P 500.Comparatively, Donegal Group has a beta of 0.3, indicating that its stock price is 70% less volatile than the S&P 500.

Dividends

XL Group pays an annual dividend of $0.88 per share and has a dividend yield of 2.5%. Donegal Group pays an annual dividend of $0.56 per share and has a dividend yield of 3.2%. XL Group pays out -71.5% of its earnings in the form of a dividend. 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. Donegal Group has raised its dividend for 4 consecutive years. Donegal Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent ratings and target prices for XL Group and Donegal Group, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
XL Group 1 6 6 0 2.38
Donegal Group 0 0 2 0 3.00

XL Group presently has a consensus price target of $44.91, indicating a potential upside of 27.44%. Donegal Group has a consensus price target of $19.50, indicating a potential upside of 11.75%. Given XL Group’s higher probable upside, equities research analysts plainly believe XL Group is more favorable than Donegal Group.

Institutional and Insider Ownership

99.0% of XL Group shares are held by institutional investors. Comparatively, 29.3% of Donegal Group shares are held by institutional investors. 3.0% of XL Group shares are held by company insiders. Comparatively, 11.9% of Donegal Group shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Summary

Donegal Group beats XL Group on 9 of the 17 factors compared between the two stocks.

About XL Group

XL Group plc is an insurance and reinsurance company providing property, casualty and specialty products to industrial, commercial and professional firms, insurance companies and other enterprises. The Company operates through two segments: Insurance and Reinsurance. The Company’s Insurance segment is organized into four product divisions: Global Casualty (Casualty); Global Energy Property, & Construction (EPC); Global Professional (Professional), and Global Specialty (Specialty). Its insurance operations provide insurance policies for corporate risks that may require large limits, use of a captive insurance company and the need for a program of locally issued policies. The Reinsurance segment provides casualty, property risk, property catastrophe, specialty, and other reinsurance lines on a global basis with business being written on both a proportional and non-proportional treaty basis, and also on a facultative basis.

About Donegal Group

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.

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