Critical Contrast: Prudential Financial (NYSE:PRU) versus Assured Guaranty (NYSE:AGO)

Assured Guaranty (NYSE:AGO) and Prudential Financial (NYSE:PRU) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, analyst recommendations, earnings, institutional ownership, valuation, profitability and risk.

Earnings & Valuation

This table compares Assured Guaranty and Prudential Financial”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Assured Guaranty	$1.11 billion	3.39	$503.00 million	$8.71	9.77
Prudential Financial	$57.68 billion	0.73	$3.58 billion	$9.72	12.53

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

Analyst Recommendations

This is a breakdown of current recommendations for Assured Guaranty and Prudential Financial, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Assured Guaranty	0	2	3	0	2.60
Prudential Financial	5	11	1	0	1.76

Assured Guaranty presently has a consensus price target of $91.67, suggesting a potential upside of 7.67%. Prudential Financial has a consensus price target of $105.46, suggesting a potential downside of 13.44%. Given Assured Guaranty’s stronger consensus rating and higher possible upside, analysts clearly believe Assured Guaranty is more favorable than Prudential Financial.

Dividends

Assured Guaranty pays an annual dividend of $1.52 per share and has a dividend yield of 1.8%. Prudential Financial pays an annual dividend of $5.60 per share and has a dividend yield of 4.6%. Assured Guaranty pays out 17.5% of its earnings in the form of a dividend. Prudential Financial pays out 57.6% 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. Assured Guaranty has raised its dividend for 7 consecutive years and Prudential Financial has raised its dividend for 2 consecutive years.

Insider & Institutional Ownership

92.2% of Assured Guaranty shares are held by institutional investors. Comparatively, 56.8% of Prudential Financial shares are held by institutional investors. 5.7% of Assured Guaranty shares are held by insiders. Comparatively, 0.1% of Prudential Financial shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Risk and Volatility

Assured Guaranty has a beta of 0.75, meaning that its stock price is 25% less volatile than the S&P 500. Comparatively, Prudential Financial has a beta of 0.85, meaning that its stock price is 15% less volatile than the S&P 500.

Profitability

This table compares Assured Guaranty and Prudential Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Assured Guaranty	40.45%	6.98%	3.25%
Prudential Financial	5.83%	16.33%	0.68%

Summary

Assured Guaranty beats Prudential Financial on 10 of the 17 factors compared between the two stocks.

About Assured Guaranty

Assured Guaranty Ltd., together with its subsidiaries, provides credit protection products to public finance, infrastructure, and structured finance markets in the United States and internationally. It operates through two segments: Insurance and Asset Management. The company offers financial guaranty insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments. It insures and reinsures various debt obligations, including bonds issued by the United States state governmental authorities; and notes issued to finance infrastructure projects. In addition, the company insures and reinsures various the U.S. public finance obligations, such as general obligation, tax-backed, municipal utility, transportation, healthcare, higher education, infrastructure, housing revenue, investor-owned utility, renewable energy, and other public finance bonds. Further, the company involved in insuring and reinsuring of non-U.S. public finance obligations comprising regulated utilities, infrastructure finance, sovereign and sub-sovereign, renewable energy bonds, pooled infrastructure, and other public finance obligations; and the U.S. and non-U.S. Structured finance obligations, including residential mortgage-backed securities, life insurance transactions, consumer receivables securities, subscription finance facilities, pooled corporate obligations, and financial products. Additionally, it offers specialty business, such as real estate properties, insurance securitizations, and aircraft residual value insurance (RVI) transactions; and asset management services comprising investment advisory services. It markets its financial guaranty insurance directly to issuers and underwriters of public finance and structured finance securities, as well as to investors in such obligations. Assured Guaranty Ltd. was incorporated in 2003 and is headquartered in Hamilton, Bermuda.

About Prudential Financial

Prudential Financial, Inc., together with its subsidiaries, provides insurance, investment management, and other financial products and services in the United States and internationally. It operates through PGIM, Retirement Strategies, Group Insurance, Individual Life, and International Businesses segments. The PGIM segment offers investment management services and solutions related to public fixed income, public equity, real estate debt and equity, private credit and other alternatives, and multi-asset class strategies to institutional and retail clients, as well as its general account. The Retirement Strategies segment provides a range of retirement investment, and income products and services to retirement plan sponsors in the public, private, and not-for-profit sectors; develops and distributes individual variable and fixed annuity products. The Group Insurance segment offers various group life, and long-term and short-term group disability, as well as group corporate-, bank-, and trust-owned life insurance in the United States primarily for institutional clients for use in connection with employee and membership benefits plans; sells accidental death and dismemberment, and other supplemental health solutions; and plan administration services in connection with its insurance coverages. The Individual Life segment develops and distributes variable life, universal life, and term life insurance products. The International Businesses segment develops and distributes life insurance, retirement products, investment products, and certain accident and health products; and advisory services. The company provides its products and services to individual and institutional customers through its proprietary and third-party distribution networks. Prudential Financial, Inc. was founded in 1875 and is headquartered in Newark, New Jersey.