Analyzing American Financial Group (NYSE:AFG) and Essent Group (NYSE:ESNT)

Essent Group (NYSE:ESNT) and American Financial Group (NYSE:AFG) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, valuation, earnings, risk, dividends, profitability and analyst recommendations.

Volatility & Risk

Essent Group has a beta of 0.91, meaning that its share price is 9% less volatile than the S&P 500. Comparatively, American Financial Group has a beta of 0.69, meaning that its share price is 31% less volatile than the S&P 500.

Profitability

This table compares Essent Group and American Financial Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Essent Group	54.72%	12.09%	9.45%
American Financial Group	10.30%	18.64%	2.70%

Dividends

Essent Group pays an annual dividend of $1.40 per share and has a dividend yield of 2.5%. American Financial Group pays an annual dividend of $3.52 per share and has a dividend yield of 2.8%. Essent Group pays out 20.3% of its earnings in the form of a dividend. American Financial Group pays out 35.0% 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. Essent Group has increased its dividend for 6 consecutive years and American Financial Group has increased its dividend for 19 consecutive years. American Financial Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of current ratings for Essent Group and American Financial Group, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Essent Group	0	6	5	0	2.45
American Financial Group	0	3	2	0	2.40

Essent Group currently has a consensus target price of $68.43, suggesting a potential upside of 19.80%. American Financial Group has a consensus target price of $141.25, suggesting a potential upside of 13.64%. Given Essent Group’s stronger consensus rating and higher possible upside, equities analysts clearly believe Essent Group is more favorable than American Financial Group.

Insider & Institutional Ownership

93.0% of Essent Group shares are owned by institutional investors. Comparatively, 64.4% of American Financial Group shares are owned by institutional investors. 2.9% of Essent Group shares are owned by company insiders. Comparatively, 17.4% of American Financial Group shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Essent Group and American Financial Group”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Essent Group	$1.26 billion	4.28	$689.97 million	$6.89	8.29
American Financial Group	$8.17 billion	1.27	$842.00 million	$10.07	12.34

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

Summary

Essent Group beats American Financial Group on 9 of the 17 factors compared between the two stocks.

About Essent Group

Essent Group Ltd., through its subsidiaries, provides private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. Its mortgage insurance products include primary, pool, and master policy. The company also provides information technology maintenance and development services; customer support-related services; underwriting consulting; and contract underwriting services, as well as risk management products and title insurance and settlement services. It serves the originators of residential mortgage loans, such as regulated depository institutions, mortgage banks, credit unions, and other lenders. Essent Group Ltd. was incorporated in 2008 and is based in Hamilton, Bermuda.

About American Financial Group

American Financial Group, Inc., an insurance holding company, provides specialty property and casualty insurance products in the United States. The company offers property and transportation insurance products, such as physical damage and liability coverage for buses and trucks, inland and ocean marine, agricultural-related products, and other commercial property and specialty transportation coverages; specialty casualty insurance, including primarily excess and surplus, executive and professional liability, general liability, umbrella and excess liability, and specialty coverage in targeted markets, as well as customized programs for small to mid-sized businesses and workers’ compensation insurance; and specialty financial insurance products comprising risk management insurance programs for lending and leasing institutions, fidelity and surety products, and trade credit insurance. It sells its property and casualty insurance products through independent insurance agents and brokers. The company was founded in 1872 and is headquartered in Cincinnati, Ohio.