Critical Contrast: Essent Group (NYSE:ESNT) & Donegal Group (NASDAQ:DGICA)

Donegal Group (NASDAQ:DGICA) and Essent Group (NYSE:ESNT) are both finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their profitability, dividends, valuation, institutional ownership, analyst recommendations, earnings and risk.

Dividends

Donegal Group pays an annual dividend of $0.73 per share and has a dividend yield of 3.5%. Essent Group pays an annual dividend of $1.24 per share and has a dividend yield of 1.9%. Donegal Group pays out 30.2% of its earnings in the form of a dividend. Essent Group pays out 18.0% 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. Donegal Group has raised its dividend for 5 consecutive years and Essent Group has raised its dividend for 6 consecutive years.

Volatility & Risk

Donegal Group has a beta of 0.04, indicating that its share price is 96% less volatile than the S&P 500. Comparatively, Essent Group has a beta of 0.9, indicating that its share price is 10% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Donegal Group	8.72%	14.28%	3.54%
Essent Group	55.63%	12.40%	9.73%

Earnings & Valuation

This table compares Donegal Group and Essent Group”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Donegal Group	$987.83 million	0.78	$50.86 million	$2.42	8.66
Essent Group	$1.24 billion	5.20	$729.40 million	$6.87	9.72

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

Analyst Ratings

This is a summary of recent ratings for Donegal Group and Essent Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Donegal Group	0	1	2	1	3.00
Essent Group	1	4	4	0	2.33

Donegal Group currently has a consensus price target of $18.00, indicating a potential downside of 14.08%. Essent Group has a consensus price target of $66.67, indicating a potential downside of 0.19%. Given Essent Group’s higher possible upside, analysts clearly believe Essent Group is more favorable than Donegal Group.

Insider & Institutional Ownership

28.0% of Donegal Group shares are owned by institutional investors. Comparatively, 93.0% of Essent Group shares are owned by institutional investors. 6.6% of Donegal Group shares are owned by insiders. Comparatively, 2.9% of Essent Group shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Summary

Essent Group beats Donegal Group on 13 of the 18 factors compared between the two stocks.

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.

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.