Analyzing American Equity Investment Life (AEL) and Emergent Capital (EMGC)

American Equity Investment Life (NYSE: AEL) and Emergent Capital (OTCMKTS:EMGC) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their earnings, dividends, valuation, profitability, risk, analyst recommendations and institutional ownership.

Profitability

This table compares American Equity Investment Life and Emergent Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Equity Investment Life 7.90% 10.50% 0.46%
Emergent Capital -42.49% -12.80% -3.98%

Insider & Institutional Ownership

93.9% of American Equity Investment Life shares are held by institutional investors. 4.1% of American Equity Investment Life shares are held by insiders. Comparatively, 33.3% of Emergent Capital shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

American Equity Investment Life pays an annual dividend of $0.26 per share and has a dividend yield of 0.8%. Emergent Capital does not pay a dividend. American Equity Investment Life pays out 9.0% of its earnings in the form of a dividend. American Equity Investment Life has increased its dividend for 4 consecutive years.

Earnings & Valuation

This table compares American Equity Investment Life and Emergent Capital’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
American Equity Investment Life $2.22 billion 1.23 $83.24 million $2.88 10.67
Emergent Capital $1.12 million 55.68 -$49.68 million N/A N/A

American Equity Investment Life has higher revenue and earnings than Emergent Capital.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for American Equity Investment Life and Emergent Capital, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Equity Investment Life 0 6 1 0 2.14
Emergent Capital 0 0 1 0 3.00

American Equity Investment Life currently has a consensus price target of $28.14, suggesting a potential downside of 8.42%. Given American Equity Investment Life’s higher probable upside, equities research analysts clearly believe American Equity Investment Life is more favorable than Emergent Capital.

Volatility and Risk

American Equity Investment Life has a beta of 2.55, indicating that its stock price is 155% more volatile than the S&P 500. Comparatively, Emergent Capital has a beta of 0.05, indicating that its stock price is 95% less volatile than the S&P 500.

Summary

American Equity Investment Life beats Emergent Capital on 10 of the 14 factors compared between the two stocks.

About American Equity Investment Life

American Equity Investment Life Holding Company is engaged in the development and sale of fixed index and fixed rate annuity products. The Company issues fixed annuity and life insurance products through its life insurance subsidiaries, American Equity Investment Life Insurance Company, American Equity Investment Life Insurance Company of New York and Eagle Life Insurance Company. Its target market includes the group of individuals aged 45 to 75 seeking to accumulate tax-deferred savings or create guaranteed lifetime income. The Company distributes through a range of distribution channels, including independent agents, broker/dealers, banks and registered investment advisors. Its product types include fixed index annuities, annual reset fixed rate annuities, multi-year fixed rate annuities and single premium immediate annuities. Its life insurance products include traditional ordinary and term, universal life and other interest-sensitive life insurance products.

About Emergent Capital

Emergent Capital, Inc., formerly Imperial Holdings, Inc., is a specialty finance company that invests in asset classes, primarily life settlements. The Company, through its subsidiary companies, owns a portfolio of approximately 630 life insurance policies (life settlements). The Company purchases individual policies and portfolios of life insurance policies and manages those assets based on actuarial and market data. The Company provides customized liquidity solutions to owners of illiquid financial assets in two markets, which include life finance and structured settlements. The Company focuses on lending to outright purchases of portfolios, to tertiary trades, as well as individual secondary market purchases. The Company invests in short and long-term life settlement investments.

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