Head to Head Survey: Donegal Group (NASDAQ:DGICA) vs. First American Financial (NYSE:FAF)

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

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Donegal Group and First American Financial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Donegal Group	0	2	2	0	2.50
First American Financial	1	1	3	0	2.40

Donegal Group presently has a consensus price target of $18.00, suggesting a potential downside of 7.36%. First American Financial has a consensus price target of $76.50, suggesting a potential upside of 25.21%. Given First American Financial’s higher probable upside, analysts clearly believe First American Financial is more favorable than Donegal Group.

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Donegal Group	$989.60 million	0.72	$50.86 million	$2.42	8.03
First American Financial	$6.13 billion	1.02	$131.10 million	$4.65	13.14

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

Insider and Institutional Ownership

28.0% of Donegal Group shares are owned by institutional investors. Comparatively, 89.1% of First American Financial shares are owned by institutional investors. 6.6% of Donegal Group shares are owned by company insiders. Comparatively, 3.7% of First American Financial shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Volatility & Risk

Donegal Group has a beta of 0.05, indicating that its stock price is 95% less volatile than the S&P 500. Comparatively, First American Financial has a beta of 1.27, indicating that its stock price is 27% more volatile than the S&P 500.

Dividends

Donegal Group pays an annual dividend of $0.73 per share and has a dividend yield of 3.8%. First American Financial pays an annual dividend of $2.20 per share and has a dividend yield of 3.6%. Donegal Group pays out 30.2% of its earnings in the form of a dividend. First American Financial pays out 47.3% 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. Donegal Group has raised its dividend for 5 consecutive years and First American Financial has raised its dividend for 15 consecutive years. Donegal Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Donegal Group and First American Financial’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%
First American Financial	6.80%	11.01%	3.50%

Summary

First American Financial beats Donegal Group on 10 of the 17 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 First American Financial

First American Financial Corporation, through its subsidiaries, provides financial services. It operates through Title Insurance and Services, and Home Warranty segments. The Title Insurance and Services segment issues title insurance policies on residential and commercial property, as well as offers related products and services internationally. This segment also provides closing and/or escrow services; products, services, and solutions to mitigate risk or otherwise facilitate real estate transactions; and appraisals and other valuation-related products and services, lien release and document custodial services, warehouse lending services, default-related products and services, document generation services, mortgage loans subservicing, and related products and services, as well as banking, trust, and wealth management services. In addition, it accommodates tax-deferred exchanges of real estate; and maintains, manages, and provides access to title plant data and records. This segment offers its products through a network of direct operations and agents in various states and in the District of Columbia, as well as in Canada, the United Kingdom, Australia, New Zealand, South Korea, and internationally. The Home Warranty segment provides home warranty products, including residential service contracts that cover residential systems, such as heating and air conditioning systems, and various appliances against failures that occur as the result of normal usage during the coverage period. This segment operates in various states and the District of Columbia. The company was founded in 1889 and is headquartered in Santa Ana, California.