Investors are increasingly scrutinizing mid-cap finance companies to identify optimal opportunities. A recent analysis pits The Hanover Insurance Group (NYSE:THG) against Stewart Information Services (NYSE:STC) in a comprehensive comparison of their financial health and investment potential.
Analyst Recommendations and Target Prices
Current analyst ratings reveal contrasting opinions on the two companies. According to MarketBeat, The Hanover Insurance Group holds a consensus rating score of 2.67, based on no “sell” ratings and three “hold” ratings. In comparison, Stewart Information Services also has a score of 2.67, with no “sell” ratings but two “hold” ratings and one “buy” rating.
The target price for The Hanover stands at $195.83, indicating a potential upside of 6.06%. Conversely, Stewart’s target price is $77.50, suggesting a more enticing potential upside of 8.52%. This higher probable upside positions Stewart as a more favorable option among analysts, despite their similar rating scores.
Financial Performance and Valuation
A direct comparison of key financial metrics shows that The Hanover Insurance Group outperforms Stewart Information Services in various areas. The Hanover generated gross revenue of $6.24 billion and a net income of $426 million. Its earnings per share (EPS) stand at $17.29, with a price-to-earnings (P/E) ratio of 10.68.
On the other hand, Stewart reported gross revenue of $2.49 billion and net income of $73.31 million, with an EPS of $3.59 and a P/E ratio of 19.89. The lower P/E ratio for The Hanover suggests it may be a more affordable investment compared to Stewart.
When examining profitability, The Hanover boasts a net margin of 9.71% and a return on equity of 21.73%, significantly higher than Stewart’s net margin of 3.65% and return on equity of 8.57%. Both companies show a return on assets nearing similar levels, with The Hanover at 4.30% and Stewart at 4.45%.
Risk Assessment and Dividend Policies
In terms of volatility, The Hanover has a beta of 0.33, indicating it is 67% less volatile than the S&P 500, making it a potentially safer investment. Conversely, Stewart has a beta of 1.04, suggesting a 4% increase in volatility compared to the index.
Both companies have established dividend policies. The Hanover pays an annual dividend of $3.80 per share, yielding 2.1%, while Stewart offers a dividend of $2.10 per share, yielding 2.9%. The Hanover’s dividend payout ratio is 22.0%, indicating a sustainable dividend approach. Stewart’s higher payout ratio of 58.5% suggests a more aggressive return of earnings to shareholders.
The Hanover has a long history of dividend growth, having raised its dividend for 20 consecutive years. In contrast, Stewart has increased its dividend for 4 consecutive years.
Ownership and Institutional Support
Institutional ownership plays a significant role in evaluating these companies. Approximately 86.6% of The Hanover’s shares are held by institutional investors, while 96.9% of Stewart’s shares are under institutional ownership. This strong backing from large investors signals confidence in both companies’ future growth prospects.
Company insiders hold 2.5% of The Hanover’s shares compared to 1.5% for Stewart, indicating a slightly higher level of insider investment in The Hanover.
Conclusion
In summary, The Hanover Insurance Group outperforms Stewart Information Services on ten of the sixteen financial metrics analyzed. Although Stewart shows a higher potential upside based on analyst target prices, The Hanover offers stronger revenue, earnings, and profitability figures. Investors should weigh these factors carefully to determine which company aligns best with their investment strategies and risk tolerance.
Both companies have rich histories, with The Hanover founded in 1852 and headquartered in Worcester, Massachusetts, and Stewart established in 1893 with its headquarters in Houston, Texas. The choice between them will depend on individual investment goals and market conditions.
