Employers (NYSE:EIG) and State Auto Financial (NASDAQ:STFC) are both small-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their analyst recommendations, valuation, earnings, dividends, institutional ownership, risk and profitability.
Institutional & Insider Ownership
78.6% of Employers shares are owned by institutional investors. Comparatively, 35.2% of State Auto Financial shares are owned by institutional investors. 3.5% of Employers shares are owned by insiders. Comparatively, 1.5% of State Auto Financial shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.
Employers pays an annual dividend of $0.80 per share and has a dividend yield of 1.8%. State Auto Financial pays an annual dividend of $0.40 per share and has a dividend yield of 1.3%. Employers pays out 27.7% of its earnings in the form of a dividend. State Auto Financial pays out -100.0% 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 raised its dividend for 2 consecutive years. Employers is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
This is a breakdown of recent ratings for Employers and State Auto Financial, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|State Auto Financial||0||1||0||0||2.00|
Employers presently has a consensus target price of $53.00, indicating a potential upside of 17.91%. State Auto Financial has a consensus target price of $30.00, indicating a potential downside of 1.54%. Given Employers’ stronger consensus rating and higher possible upside, research analysts clearly believe Employers is more favorable than State Auto Financial.
Earnings & Valuation
This table compares Employers and State Auto Financial’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Employers||$799.30 million||1.84||$101.20 million||$2.89||15.55|
|State Auto Financial||$1.42 billion||0.92||-$10.70 million||($0.40)||-76.18|
Employers has higher earnings, but lower revenue than State Auto Financial. State Auto Financial is trading at a lower price-to-earnings ratio than Employers, indicating that it is currently the more affordable of the two stocks.
This table compares Employers and State Auto Financial’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|State Auto Financial||-0.82%||-0.25%||-0.07%|
Risk and Volatility
Employers has a beta of 1.04, suggesting that its stock price is 4% more volatile than the S&P 500. Comparatively, State Auto Financial has a beta of 0.71, suggesting that its stock price is 29% less volatile than the S&P 500.
Employers beats State Auto Financial on 15 of the 17 factors compared between the two stocks.
Employers Holdings, Inc., through its subsidiaries, operates in the commercial property and casualty insurance industry primarily in the United States. It offers workers' compensation insurance to small businesses in low to medium hazard industries. The company markets its products through independent local, regional, and national agents and brokers; and alternative distribution channels comprising its partners, as well as through national, regional, and local trade groups and associations. Employers Holdings, Inc. was founded in 2000 and is based in Reno, Nevada.
About State Auto Financial
State Auto Financial Corporation, through its subsidiaries, engages in writing personal, business, and specialty insurance products. It operates through four segments: Personal Insurance, Commercial Insurance, Specialty Insurance, and Investment Operations. The Personal Insurance segment primarily provides personal automobile, homeowners insurance, and other personal insurance products. The commercial insurance segment primarily provides commercial automobile, commercial multi-peril, fire and allied, general liability, and workers' compensation insurance covering small-to-medium sized commercial insurance market, as well as farm and ranch insurance. The Specialty Insurance segment provides commercial coverages that require specialized product underwriting, claims handling, or risk management services. This segment markets and underwrites specialized property exposures with a focus on catastrophe exposed risks covering property, and general liability; markets and underwrites commercial auto, healthcare, umbrella, property, and general liability coverages; and markets and distributes homogenous risks covering commercial auto, general liability, and property. The Investment Operations segment provides investment management services to affiliated insurance companies. The company markets its products primarily through independent agencies, including retail agencies and wholesale brokers. The company was founded in 1950 and is headquartered in Columbus, Ohio. State Auto Financial Corporation is a subsidiary of State Automobile Mutual Insurance Company.
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