Donegal Group (NASDAQ: DGICA) and EMC Insurance Group (NASDAQ:EMCI) are both small-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their analyst recommendations, profitability, risk, institutional ownership, valuation, dividends and earnings.

Volatility & Risk

Donegal Group has a beta of 0.29, suggesting that its stock price is 71% less volatile than the S&P 500. Comparatively, EMC Insurance Group has a beta of 0.94, suggesting that its stock price is 6% less volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Donegal Group 1.84% 2.24% 0.60%
EMC Insurance Group 5.87% 5.66% 1.98%

Analyst Recommendations

This is a summary of recent recommendations for Donegal Group and EMC Insurance Group, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Donegal Group 0 2 0 0 2.00
EMC Insurance Group 0 0 0 0 N/A

Donegal Group presently has a consensus price target of $18.00, indicating a potential upside of 13.07%. Given Donegal Group’s higher probable upside, equities research analysts plainly believe Donegal Group is more favorable than EMC Insurance Group.

Valuation and Earnings

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

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Donegal Group $715.06 million 0.61 $24.38 million $0.49 32.49
EMC Insurance Group $649.90 million 0.91 $38.22 million $1.79 15.50

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

Insider & Institutional Ownership

29.5% of Donegal Group shares are owned by institutional investors. Comparatively, 28.2% of EMC Insurance Group shares are owned by institutional investors. 11.9% of Donegal Group shares are owned by insiders. Comparatively, 4.5% of EMC Insurance Group shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Dividends

Donegal Group pays an annual dividend of $0.56 per share and has a dividend yield of 3.5%. EMC Insurance Group pays an annual dividend of $0.84 per share and has a dividend yield of 3.0%. 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. EMC Insurance Group pays out 46.9% of its earnings in the form of a dividend.

Summary

EMC Insurance Group beats Donegal Group on 8 of the 14 factors compared between the two stocks.

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.

EMC Insurance Group Company Profile

EMC Insurance Group Inc. is an insurance holding company. The Company operates through two segments: Property and Casualty Insurance and Reinsurance segment. It conducts its property and casualty insurance operations through its subsidiaries, including EMCASCO Insurance Company, Illinois EMCASCO Insurance Company and Dakota Fire Insurance Company, and its reinsurance operations through its subsidiary, EMC Reinsurance Company. The Company focuses on the sale of commercial lines of property and casualty insurance to small and medium-sized businesses. The Company offered its insurance products in 41 states, as of December 31, 2016. The Company is owned by Employers Mutual Casualty Company (Employers Mutual), a multiple-line property and casualty insurance company. The Company’s insurance agency, EMC Underwriters, LLC (EMC Underwriters), specializes in marketing excess and surplus lines of insurance.

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