Investors are evaluating two mid-cap finance companies, The Hanover Insurance Group (NYSE:THG) and Stewart Information Services (NYSE:STC), to determine which might offer better returns. This comparison assesses their analyst ratings, financial performance, dividends, and overall risk.
Analyst Recommendations and Valuation
Recent data from MarketBeat summarizes current analyst recommendations for both companies. The Hanover Insurance Group holds a consensus rating score of 2.67, reflecting no sell ratings, three hold ratings, and two buy ratings. In contrast, Stewart Information Services has a similar score of 2.67, with one buy and two hold ratings, but no sell ratings.
Analysts have set a target price of $195.83 for The Hanover Insurance Group, suggesting a potential upside of 6.06%. Meanwhile, Stewart Information Services has a target price of $77.50, indicating a more attractive potential upside of 8.52%. This suggests that analysts view Stewart Information Services as a more favorable investment based on potential growth.
Financial Performance Metrics
In terms of revenue and earnings, The Hanover Insurance Group outperforms Stewart Information Services. The Hanover reported gross revenue of $6.24 billion and a net income of $426 million, translating to earnings per share (EPS) of $17.29 with a price-to-earnings (P/E) ratio of 10.68. In comparison, Stewart Information Services generated $2.49 billion in revenue and a net income of $73.31 million, resulting in an EPS of $3.59 and a higher P/E ratio of 19.89.
The lower P/E ratio of The Hanover Insurance Group indicates that it is currently a more affordable stock, despite its higher revenue and earnings.
Profitability metrics further reveal the financial health of both companies. The Hanover boasts a net margin of 9.71%, a return on equity of 21.73%, and a return on assets of 4.30%. Stewart Information Services, while showing a positive performance, has a lower net margin of 3.65%, a return on equity of 8.57%, and a return on assets of 4.45%.
Risk Assessment and Dividends
When analyzing volatility, The Hanover Insurance Group has a beta of 0.33, indicating that its stock price is significantly less volatile than the S&P 500. Conversely, Stewart Information Services has a beta of 1.04, suggesting a slightly higher volatility than the market average.
Regarding dividends, The Hanover Insurance Group offers an annual dividend of $3.80 per share, yielding 2.1%. Stewart Information Services pays an annual dividend of $2.10 per share, with a higher yield of 2.9%. The Hanover pays out 22% of its earnings in dividends, while Stewart distributes 58.5%. Both companies have solid payout ratios, indicating their ability to sustain dividend payments.
The Hanover has a track record of increasing its dividend for 20 consecutive years, while Stewart has increased its dividends for the last 4 years.
Ownership Structure
Institutional ownership is another important factor in assessing these companies. Approximately 86.6% of The Hanover Insurance Group shares are held by institutional investors, compared to 96.9% for Stewart Information Services. In terms of insider ownership, The Hanover has 2.5% of shares held by company insiders, while Stewart has 1.5%.
Strong institutional ownership can signal confidence among large investors in the long-term growth potential of a stock.
Conclusion
Overall, The Hanover Insurance Group shows stronger financial performance across many metrics, outperforming Stewart Information Services in terms of revenue, earnings, and profitability measures. However, the higher potential upside of Stewart suggests that it may be a more appealing option for some investors looking for growth. The analysis indicates that both companies have their strengths, and investors may wish to consider their individual investment strategies when making a choice.
