State Auto Financial (STFC) and Travelers Companies (TRV) Head to Head Analysis

State Auto Financial (NASDAQ: STFC) and Travelers Companies (NYSE:TRV) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, profitability, valuation, institutional ownership, dividends, risk and analyst recommendations.

Profitability

This table compares State Auto Financial and Travelers Companies’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
State Auto Financial 1.94% -1.53% -0.46%
Travelers Companies 8.56% 9.87% 2.28%

Dividends

State Auto Financial pays an annual dividend of $0.40 per share and has a dividend yield of 1.4%. Travelers Companies pays an annual dividend of $2.88 per share and has a dividend yield of 2.1%. State Auto Financial pays out 61.5% of its earnings in the form of a dividend. Travelers Companies pays out 33.3% 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. Travelers Companies has increased its dividend for 9 consecutive years. Travelers Companies is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

State Auto Financial has a beta of 0.85, meaning that its share price is 15% less volatile than the S&P 500. Comparatively, Travelers Companies has a beta of 1.25, meaning that its share price is 25% more volatile than the S&P 500.

Valuation and Earnings

This table compares State Auto Financial and Travelers Companies’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
State Auto Financial $1.41 billion 0.86 $21.00 million $0.65 44.12
Travelers Companies $27.63 billion 1.34 $3.01 billion $8.64 15.69

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

Institutional and Insider Ownership

33.1% of State Auto Financial shares are held by institutional investors. Comparatively, 78.5% of Travelers Companies shares are held by institutional investors. 1.5% of State Auto Financial shares are held by insiders. Comparatively, 0.8% of Travelers Companies shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for State Auto Financial and Travelers Companies, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
State Auto Financial 0 1 0 0 2.00
Travelers Companies 2 6 7 0 2.33

State Auto Financial presently has a consensus price target of $26.00, suggesting a potential downside of 9.34%. Travelers Companies has a consensus price target of $133.11, suggesting a potential downside of 1.78%. Given Travelers Companies’ stronger consensus rating and higher probable upside, analysts plainly believe Travelers Companies is more favorable than State Auto Financial.

Summary

Travelers Companies beats State Auto Financial on 15 of the 17 factors compared between the two stocks.

State Auto Financial Company Profile

State Auto Financial Corporation is a property and casualty insurance holding company. The Company is engaged in writing personal, business and specialty insurance. Its segments include Personal Insurance Segment, Commercial Insurance Segment and Specialty Insurance Segment. Its Personal Insurance Segment include personal auto, homeowners and other personal; Commercial Insurance Segment include commercial auto, small commercial package, middle market commercial, workers’ compensation and other commercial, and Specialty Insurance Segment include Excess & Surplus (E&S) property, E&S casualty and programs. State Auto Financial’s subsidiaries include State Auto Property & Casualty Insurance Company (State Auto P&C), Milbank Insurance Company (Milbank) and State Auto Insurance Company of Ohio (SA Ohio), each of which is a property and casualty insurance company, and Stateco Financial Services, Inc., (Stateco), which provides investment management services to affiliated insurance companies.

Travelers Companies Company Profile

The Travelers Companies, Inc. is a holding company. The Company’s segments include Business and International Insurance; Bond & Specialty Insurance, and Personal Insurance. Through its subsidiaries, it provides commercial and personal property and casualty insurance products and services. The Business and International Insurance segment offers property and casualty insurance and insurance related services to its clients, in the United States and in Canada, as well as in the United Kingdom, the Republic of Ireland, Brazil and throughout other parts of the world. The Bond & Specialty Insurance segment provides surety, fidelity, management liability, professional liability, and other property and casualty coverages and related risk management services to a range of primarily domestic customers, utilizing various degrees of financially-based underwriting approaches. The Personal Insurance segment writes a range of property and casualty insurance covering individuals’ personal risks.

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