Head to Head Review: Marsh & McLennan Companies (NYSE:MRSH) and Donegal Group (NASDAQ:DGICA)

Marsh & McLennan Companies (NYSE:MRSH) and Donegal Group (NASDAQ:DGICA) are both finance companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, dividends, analyst recommendations, institutional ownership, valuation, risk and earnings.

Earnings and Valuation

This table compares Marsh & McLennan Companies and Donegal Group”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Marsh & McLennan Companies	$26.98 billion	2.99	$4.16 billion	$8.18	20.64
Donegal Group	$978.01 million	0.68	$79.34 million	$1.93	9.33

Marsh & McLennan Companies has higher revenue and earnings than Donegal Group. Donegal Group is trading at a lower price-to-earnings ratio than Marsh & McLennan Companies, indicating that it is currently the more affordable of the two stocks.

Dividends

Marsh & McLennan Companies pays an annual dividend of $3.96 per share and has a dividend yield of 2.3%. Donegal Group pays an annual dividend of $0.77 per share and has a dividend yield of 4.3%. Marsh & McLennan Companies pays out 48.4% of its earnings in the form of a dividend. Donegal Group pays out 39.9% 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. Marsh & McLennan Companies has increased its dividend for 15 consecutive years and Donegal Group has increased its dividend for 5 consecutive years. Donegal Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of recent recommendations for Marsh & McLennan Companies and Donegal Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Marsh & McLennan Companies	1	10	5	2	2.44
Donegal Group	1	1	1	0	2.00

Marsh & McLennan Companies currently has a consensus target price of $203.50, suggesting a potential upside of 20.54%. Donegal Group has a consensus target price of $20.00, suggesting a potential upside of 11.05%. Given Marsh & McLennan Companies’ stronger consensus rating and higher possible upside, equities research analysts plainly believe Marsh & McLennan Companies is more favorable than Donegal Group.

Risk & Volatility

Marsh & McLennan Companies has a beta of 0.58, indicating that its share price is 42% less volatile than the S&P 500. Comparatively, Donegal Group has a beta of -0.01, indicating that its share price is 101% less volatile than the S&P 500.

Institutional and Insider Ownership

88.0% of Marsh & McLennan Companies shares are owned by institutional investors. Comparatively, 28.0% of Donegal Group shares are owned by institutional investors. 0.4% of Marsh & McLennan Companies shares are owned by insiders. Comparatively, 2.8% of Donegal Group shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Marsh & McLennan Companies and Donegal Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Marsh & McLennan Companies	14.24%	32.67%	8.44%
Donegal Group	7.38%	10.65%	2.83%

Summary

Marsh & McLennan Companies beats Donegal Group on 15 of the 18 factors compared between the two stocks.

About Marsh & McLennan Companies

Marsh & McLennan Cos., Inc. is a professional services firm, which engages in offering clients advice and solutions in risk, strategy, and people. It operates through the Risk and Insurance Services, and Consulting segments. The Risk and Insurance Services segment is involved in risk management activities, as well as insurance and reinsurance broking and services. The Consulting segment offers health, wealth, and career solutions and products, and specialized management, strategic, economic, and brand consulting services. The company was founded by Henry W. Marsh and Donald R. McLennan in 1871 and is headquartered in New York, NY.

About Donegal Group

Donegal Group Inc., an insurance holding company, provides property and casualty insurance to businesses and individuals. It operates through three segments: Investment Function, Personal Lines of Insurance, and Commercial Lines of Insurance. The company offers private passenger automobile policies that provide protection against liability for bodily injury and property damage arising from automobile accidents, as well as protection against loss from damage to automobiles; and homeowners policies, which provide coverage for damage to residences and their contents from a range of perils, including fire, lightning, windstorm, and theft, as well as liability of the insured arising from injury to other persons or their property. It also offers commercial automobile policies that provide protection against liability for bodily injury and property damage arising from automobile accidents and protection against loss from damage to automobiles owned by the insured; commercial multi-peril policies that provide protection to businesses against combining liability and physical damage coverages; and workers’ compensation policies, which provide benefits to employees for injuries sustained during employment. The company markets its insurance products primarily to Mid-Atlantic, Midwestern, New England, Southern, and Southwestern regions through independent insurance agencies. Donegal Group Inc. was incorporated in 1986 and is based in Marietta, Pennsylvania. Donegal Group Inc. operates as a subsidiary of Donegal Mutual Insurance Company.