National Interstate (NASDAQ: NATL) and State Auto Financial (NASDAQ:STFC) are both financials companies, but which is the superior stock? We will contrast the two companies based on the strength of their earnings, risk, profitability, dividends, valuation, analyst recommendations and institutional ownership.

Institutional & Insider Ownership

84.9% of National Interstate shares are owned by institutional investors. Comparatively, 33.1% of State Auto Financial shares are owned by institutional investors. 11.8% of National Interstate shares are owned by company insiders. Comparatively, 1.5% of State Auto Financial shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares National Interstate and State Auto Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
National Interstate 5.91% 10.13% 1.94%
State Auto Financial 1.94% -1.53% -0.46%

Dividends

National Interstate pays an annual dividend of $0.56 per share and has a dividend yield of 1.7%. State Auto Financial pays an annual dividend of $0.40 per share and has a dividend yield of 1.4%. National Interstate pays out 40.6% of its earnings in the form of a dividend. State Auto Financial pays out 61.5% 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. National Interstate is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of recent recommendations for National Interstate and State Auto Financial, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
National Interstate 0 0 0 0 N/A
State Auto Financial 0 1 0 0 2.00

State Auto Financial has a consensus price target of $26.00, suggesting a potential downside of 10.71%. Given State Auto Financial’s higher probable upside, analysts clearly believe State Auto Financial is more favorable than National Interstate.

Valuation & Earnings

This table compares National Interstate and State Auto Financial’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
National Interstate N/A N/A N/A $1.38 23.56
State Auto Financial $1.41 billion 0.88 $21.00 million $0.65 44.80

State Auto Financial has higher revenue and earnings than National Interstate. National Interstate is trading at a lower price-to-earnings ratio than State Auto Financial, indicating that it is currently the more affordable of the two stocks.

Summary

National Interstate beats State Auto Financial on 8 of the 11 factors compared between the two stocks.

National Interstate Company Profile

National Interstate Corporation and its subsidiaries operate as an insurance holding company that underwrites and sells traditional and alternative property and casualty insurance products to the passenger transportation, trucking and moving and storage industries, general commercial insurance to small businesses in Hawaii and Alaska and personal insurance to owners of recreational vehicles throughout the United States. The Company is a specialty property and casualty insurance company with a focus on the transportation industry. The Company operates through property and casualty insurance segment. The Company offers approximately 40 product lines in the specialty property and casualty insurance market, which it groups into approximately four general business components: alternative risk transfer (ART), transportation, specialty personal lines, and Hawaii and Alaska based on the class of business, insureds’ risk participation or geographic location.

State Auto Financial Company Profile

State Auto Financial Corporation is a property and casualty insurance holding company. The Company is engaged in writing personal, business and specialty insurance. Its segments include Personal Insurance Segment, Commercial Insurance Segment and Specialty Insurance Segment. Its Personal Insurance Segment include personal auto, homeowners and other personal; Commercial Insurance Segment include commercial auto, small commercial package, middle market commercial, workers’ compensation and other commercial, and Specialty Insurance Segment include Excess & Surplus (E&S) property, E&S casualty and programs. State Auto Financial’s subsidiaries include State Auto Property & Casualty Insurance Company (State Auto P&C), Milbank Insurance Company (Milbank) and State Auto Insurance Company of Ohio (SA Ohio), each of which is a property and casualty insurance company, and Stateco Financial Services, Inc., (Stateco), which provides investment management services to affiliated insurance companies.

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