Contrasting Cincinnati Financial (CINF) & Donegal Group (DGICA)

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

Dividends

Cincinnati Financial pays an annual dividend of $2.00 per share and has a dividend yield of 2.7%. Donegal Group pays an annual dividend of $0.56 per share and has a dividend yield of 3.2%. Cincinnati Financial pays out 66.2% 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. Cincinnati Financial has raised its dividend for 57 consecutive years.

Profitability

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

Net Margins Return on Equity Return on Assets
Cincinnati Financial 8.93% 5.85% 2.03%
Donegal Group 2.13% 2.81% 0.75%

Analyst Ratings

This is a breakdown of current ratings for Cincinnati Financial and Donegal Group, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cincinnati Financial 0 3 1 0 2.25
Donegal Group 0 0 2 0 3.00

Cincinnati Financial currently has a consensus target price of $77.33, indicating a potential upside of 3.30%. Donegal Group has a consensus target price of $19.50, indicating a potential upside of 10.80%. Given Donegal Group’s stronger consensus rating and higher probable upside, analysts plainly believe Donegal Group is more favorable than Cincinnati Financial.

Insider and Institutional Ownership

64.5% of Cincinnati Financial shares are held by institutional investors. Comparatively, 29.3% of Donegal Group shares are held by institutional investors. 9.3% of Cincinnati Financial 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 large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Cincinnati Financial and Donegal Group’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cincinnati Financial $5.45 billion 2.25 $591.00 million $3.02 24.79
Donegal Group $688.42 million 0.70 $30.80 million $0.57 30.88

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

Volatility & Risk

Cincinnati Financial has a beta of 0.93, indicating that its stock price is 7% less volatile than 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.

Summary

Cincinnati Financial beats Donegal Group on 11 of the 17 factors compared between the two stocks.

Cincinnati Financial Company Profile

Cincinnati Financial Corporation is an insurance holding company. It operates through five segments: Commercial lines insurance, Personal lines insurance, Excess and surplus lines insurance, and Life insurance and Investments. Its Commercial Lines Insurance Segment provides five commercial business lines: commercial casualty, commercial property, commercial auto, workers’ compensation and other commercial lines. Its personal lines property insurance segment writes personal lines coverage in accounts that include both auto and homeowner coverages, as well as coverages that are part of its other personal business line. The excess and surplus lines Insurance segment covers business risks with characteristics, such as the nature of the business or its claim history that are difficult to profitably insure in the standard commercial lines market. The life insurance business lines include term life insurance, universal life insurance, worksite products and whole life insurance.

Donegal Group Company Profile

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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