Employers (NYSE: EIG) and American Financial Group (NYSE:AFG) are both finance companies, but which is the superior business? We will compare the two companies based on the strength of their analyst recommendations, valuation, dividends, institutional ownership, profitability, earnings and risk.

Risk & Volatility

Employers has a beta of 1.14, meaning that its share price is 14% more volatile than the S&P 500. Comparatively, American Financial Group has a beta of 0.85, meaning that its share price is 15% less volatile than the S&P 500.

Profitability

This table compares Employers and American Financial Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Employers 13.32% 10.39% 2.40%
American Financial Group 10.22% 10.90% 0.98%

Dividends

Employers pays an annual dividend of $0.60 per share and has a dividend yield of 1.4%. American Financial Group pays an annual dividend of $1.40 per share and has a dividend yield of 1.3%. Employers pays out 18.8% of its earnings in the form of a dividend. American Financial Group pays out 18.0% 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. Employers has increased its dividend for 2 consecutive years and American Financial Group has increased its dividend for 12 consecutive years.

Valuation and Earnings

This table compares Employers and American Financial Group’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Employers $779.80 million 1.79 $106.70 million $3.19 13.46
American Financial Group $6.50 billion 1.49 $649.00 million $7.79 14.07

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

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Employers and American Financial Group, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Employers 1 0 1 0 2.00
American Financial Group 0 1 1 0 2.50

Employers currently has a consensus target price of $44.50, indicating a potential upside of 3.61%. American Financial Group has a consensus target price of $111.00, indicating a potential upside of 1.27%. Given Employers’ higher probable upside, research analysts clearly believe Employers is more favorable than American Financial Group.

Institutional & Insider Ownership

77.4% of Employers shares are owned by institutional investors. Comparatively, 61.4% of American Financial Group shares are owned by institutional investors. 3.5% of Employers shares are owned by insiders. Comparatively, 14.9% of American Financial Group shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Summary

American Financial Group beats Employers on 9 of the 16 factors compared between the two stocks.

Employers Company Profile

Employers Holdings, Inc. is a holding company. Through its insurance subsidiaries, the Company provides workers’ compensation insurance coverage to select, small businesses in low to medium hazard industries. It provides workers’ compensation insurance under a statutory system wherein employers are required to provide coverage for their employees’ medical, disability, vocational rehabilitation, and/or death benefit costs for work-related injuries or illnesses. As of December 31, 2016 the Company provided workers’ compensation insurance in 36 states and the District of Columbia, with a concentration in California. Its insurance subsidiaries include Employers Insurance Company of Nevada (EICN), Employers Compensation Insurance Company (ECIC), Employers Preferred Insurance Company (EPIC) and Employers Assurance Company (EAC). The Company’s insurance products are jointly offered and marketed with and through its partners and alliances.

American Financial Group Company Profile

American Financial Group, Inc. (AFG) is a holding company engaged primarily in property and casualty insurance businesses. The Company, through Great American Insurance Group, focuses on commercial products for businesses, and is engaged in the sale of fixed and fixed-indexed annuities in the retail, financial institutions and education markets. It has four segments: Property and casualty insurance, Annuity, Run-off long-term care and life, and Other. It reports its property and casualty insurance business in specialty sub-segments, including Property and transportation, Specialty casualty and Specialty financial. AFG sells traditional fixed and fixed-indexed annuities in the retail, financial institutions and education markets through independent producers and through direct relationships with certain financial institutions. AFG also sells single premium annuities in financial institutions through direct relationships with certain banks and through independent agents and brokers.

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