Contrasting HCI Group (NYSE:HCI) & Donegal Group (NASDAQ:DGICB)

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

Dividends

Donegal Group pays an annual dividend of $0.70 per share and has a dividend yield of 2.9%. HCI Group pays an annual dividend of $1.60 per share and has a dividend yield of 0.9%. Donegal Group pays out 41.4% of its earnings in the form of a dividend. HCI Group pays out 7.0% 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 increased its dividend for 5 consecutive years. Donegal Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Donegal Group has a beta of 0.04, meaning that its stock price is 96% less volatile than the S&P 500. Comparatively, HCI Group has a beta of 1.03, meaning that its stock price is 3% more volatile than the S&P 500.

Insider and Institutional Ownership

1.2% of Donegal Group shares are held by institutional investors. Comparatively, 87.0% of HCI Group shares are held by institutional investors. 8.6% of Donegal Group shares are held by company insiders. Comparatively, 18.5% of HCI Group shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Donegal Group and HCI Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Donegal Group	0	1	0	0	2.00
HCI Group	0	1	5	1	3.00

HCI Group has a consensus target price of $238.33, indicating a potential upside of 32.47%. Given HCI Group’s stronger consensus rating and higher possible upside, analysts clearly believe HCI Group is more favorable than Donegal Group.

Earnings & Valuation

This table compares Donegal Group and HCI Group”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Donegal Group	$978.01 million	0.92	$79.34 million	$1.69	14.36
HCI Group	$900.95 million	2.55	$299.01 million	$22.78	7.90

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Donegal Group	6.77%	10.31%	2.69%
HCI Group	32.64%	30.88%	12.31%

Summary

HCI Group beats Donegal Group on 14 of the 18 factors compared between the two stocks.

About Donegal Group

Donegal Group Inc., an insurance holding company, provides personal and commercial lines of property and casualty insurance to businesses and individuals in the Mid-Atlantic, Midwestern, New England, and southern states. It operates through four 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. It also offers homeowners policies, which provide coverage for damage to residences and their contents from a range of perils, including fire, lightning, windstorm, and theft; and liability of the insured arising from injury to other persons or their property. In addition, the company 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 various perils, primarily 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 through a network of approximately 2,400 independent insurance agencies. Donegal Group Inc. was founded in 1986 and is headquartered in Marietta, Pennsylvania.

About HCI Group

HCI Group, Inc., together with its subsidiaries, engages in the property and casualty insurance, insurance management, reinsurance, real estate, and information technology businesses in Florida. It provides residential insurance products, such as homeowners, fire, flood, and wind-only insurance to homeowners, condominium owners, and tenants for properties, as well as offers reinsurance programs. The company also owns and operates waterfront properties and retail shopping centers, and an office building, as well as commercial properties for investment purposes. In addition, it designs and develops web-based applications and products for mobile devices, including SAMS, an online policy administration platform; Harmony, a policy administration platform; ClaimColony, an end-to-end claims management platform; and AtlasViewer, a mapping and data visualization platform. The company was formerly known as Homeowners Choice, Inc. and changed its name to HCI Group, Inc. in May 2013. HCI Group, Inc. was incorporated in 2006 and is headquartered in Tampa, Florida.