Heritage Insurance Holdings (NYSE: HRTG) and Donegal Group (NASDAQ:DGICA) are both small-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, analyst recommendations, institutional ownership, risk, valuation, profitabiliy and dividends.

Valuation and Earnings

This table compares Heritage Insurance Holdings and Donegal Group’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Heritage Insurance Holdings $426.69 million 0.85 $62.33 million $1.11 11.20
Donegal Group $715.06 million 0.58 $24.41 million $0.49 30.88

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

Risk and Volatility

Heritage Insurance Holdings has a beta of 1.29, suggesting that its stock price is 29% more volatile than the S&P 500. Comparatively, Donegal Group has a beta of 0.31, suggesting that its stock price is 69% less volatile than the S&P 500.

Insider & Institutional Ownership

57.6% of Heritage Insurance Holdings shares are owned by institutional investors. Comparatively, 29.1% of Donegal Group shares are owned by institutional investors. 16.1% of Heritage Insurance Holdings shares are owned by insiders. Comparatively, 11.9% of Donegal 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.

Profitability

This table compares Heritage Insurance Holdings and Donegal Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Heritage Insurance Holdings 7.60% 8.83% 3.11%
Donegal Group 1.84% 2.24% 0.61%

Analyst Ratings

This is a summary of recent recommendations and price targets for Heritage Insurance Holdings and Donegal Group, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Heritage Insurance Holdings 0 0 3 0 3.00
Donegal Group 0 2 0 0 2.00

Heritage Insurance Holdings presently has a consensus target price of $16.33, indicating a potential upside of 31.40%. Donegal Group has a consensus target price of $19.00, indicating a potential upside of 25.58%. Given Heritage Insurance Holdings’ stronger consensus rating and higher possible upside, analysts clearly believe Heritage Insurance Holdings is more favorable than Donegal Group.

Dividends

Heritage Insurance Holdings pays an annual dividend of $0.24 per share and has a dividend yield of 1.9%. Donegal Group pays an annual dividend of $0.56 per share and has a dividend yield of 3.7%. Heritage Insurance Holdings pays out 21.6% of its earnings in the form of a dividend. Donegal Group pays out 114.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

Heritage Insurance Holdings beats Donegal Group on 13 of the 16 factors compared between the two stocks.

Heritage Insurance Holdings Company Profile

Heritage Insurance Holdings, Inc. (Heritage Insurance) is a property and casualty insurance holding company. The Company provides personal and commercial residential insurance. Through its subsidiary, Heritage Property & Casualty Insurance Company (Heritage P&C), it provides personal residential insurance for single-family homeowners and condominium owners, rental property insurance and commercial residential insurance in the state of Florida and North Carolina. The Company is vertically integrated and controls or manages all aspects of insurance underwriting, customer service, actuarial analysis, distribution and claims processing and adjusting. The Company’s primary products are personal and commercial residential insurance, which it offers only in Florida. As of December 31, 2016, it marketed and wrote personal lines voluntary policies through a network of approximately 1,900 independent agents. It had 150,998 voluntary personal residential policies as of December 31, 2016.

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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