First American (NYSE: FAF) and Horace Mann Educators (NYSE:HMN) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, risk, valuation, profitability, earnings, analyst recommendations and institutional ownership.

Valuation & Earnings

This table compares First American and Horace Mann Educators’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
First American $5.58 billion 1.10 $342.99 million $2.53 21.86
Horace Mann Educators $1.13 billion 1.67 $83.76 million $1.54 30.07

First American has higher revenue and earnings than Horace Mann Educators. First American is trading at a lower price-to-earnings ratio than Horace Mann Educators, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

83.4% of First American shares are owned by institutional investors. Comparatively, 98.3% of Horace Mann Educators shares are owned by institutional investors. 3.1% of First American shares are owned by company insiders. Comparatively, 2.4% of Horace Mann Educators shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares First American and Horace Mann Educators’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
First American 4.88% 14.30% 4.95%
Horace Mann Educators 5.56% 4.94% 0.61%

Analyst Recommendations

This is a breakdown of current ratings and price targets for First American and Horace Mann Educators, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
First American 0 1 1 0 2.50
Horace Mann Educators 0 1 0 0 2.00

First American presently has a consensus price target of $49.50, suggesting a potential downside of 10.49%. Horace Mann Educators has a consensus price target of $37.00, suggesting a potential downside of 20.09%. Given First American’s stronger consensus rating and higher possible upside, analysts plainly believe First American is more favorable than Horace Mann Educators.

Risk & Volatility

First American has a beta of 0.74, indicating that its share price is 26% less volatile than the S&P 500. Comparatively, Horace Mann Educators has a beta of 1.17, indicating that its share price is 17% more volatile than the S&P 500.

Dividends

First American pays an annual dividend of $1.52 per share and has a dividend yield of 2.7%. Horace Mann Educators pays an annual dividend of $1.10 per share and has a dividend yield of 2.4%. First American pays out 60.1% of its earnings in the form of a dividend. Horace Mann Educators pays out 71.4% 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. First American has raised its dividend for 8 consecutive years and Horace Mann Educators has raised its dividend for 5 consecutive years. First American is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

First American beats Horace Mann Educators on 12 of the 17 factors compared between the two stocks.

First American Company Profile

First American Financial Corporation, through its subsidiaries, is engaged in the business of providing financial services. The Company operates through the title insurance and services segment, and specialty insurance segment. The title insurance and services segment provides title insurance, closing and/or escrow services and similar or related services domestically and internationally in connection with residential and commercial real estate transactions. The title insurance and services segment also provides products, services and solutions involving the use of property related data, including data derived from its database, which are designed to manage risk or otherwise facilitate real estate transactions. The specialty insurance segment issues property and casualty insurance policies and sells home warranty products to residential homeowners and renters for liability losses and typical hazards, such as fire, theft, vandalism and other types of property damage.

Horace Mann Educators Company Profile

Horace Mann Educators Corporation (HMEC) is an insurance holding company. Through its subsidiaries, HMEC markets and underwrites personal lines of property and casualty (primarily personal lines automobile and homeowners) insurance, retirement annuities (primarily tax-qualified products) and life insurance in the United States. The Company’s operating segments include Property and Casualty segment, comprising primarily personal lines automobile and homeowners products; Retirement segment, comprising primarily tax-qualified fixed and variable annuities; Life segment life insurance, and Corporate and Other. It markets and services its products through a sales force of full-time agents supported by its Customer Contact Center. These agents sell HMEC’s products and limited additional third-party vendor products. As of December 31, 2016, its property and casualty subsidiaries and its life insurance subsidiary were licensed to write business in over 48 states and the District of Columbia.

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