Validus (NYSE:VR) and Mercury General (NYSE:MCY) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, risk, dividends, profitability, analyst recommendations, institutional ownership and valuation.

Dividends

Validus pays an annual dividend of $1.52 per share and has a dividend yield of 2.2%. Mercury General pays an annual dividend of $2.51 per share and has a dividend yield of 5.0%. Mercury General pays out 139.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Validus has raised its dividend for 4 consecutive years and Mercury General has raised its dividend for 33 consecutive years. Mercury General is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Validus and Mercury General’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Validus N/A N/A N/A N/A N/A
Mercury General $3.38 billion 0.82 -$5.72 million $1.80 27.99

Validus has higher earnings, but lower revenue than Mercury General.

Profitability

This table compares Validus and Mercury General’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Validus N/A N/A N/A
Mercury General -0.17% 5.91% 1.89%

Insider & Institutional Ownership

82.0% of Validus shares are held by institutional investors. Comparatively, 47.6% of Mercury General shares are held by institutional investors. 2.3% of Validus shares are held by insiders. Comparatively, 34.2% of Mercury General shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Validus and Mercury General, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Validus 0 0 0 0 N/A
Mercury General 0 0 1 0 3.00

Mercury General has a consensus price target of $69.00, suggesting a potential upside of 36.96%. Given Mercury General’s higher possible upside, analysts plainly believe Mercury General is more favorable than Validus.

Summary

Mercury General beats Validus on 8 of the 11 factors compared between the two stocks.

Validus Company Profile

Validus Holdings, Ltd. provides reinsurance coverage, insurance coverage, and insurance linked securities management services worldwide. It operates through three segments: Reinsurance, Insurance, and Asset Management. The Reinsurance segment underwrites property reinsurance products on a catastrophe excess of loss, per risk excess of loss and proportional basis; and aerospace and aviation, agriculture, composite, marine, technical lines, terrorism, trade credit, workers' compensation, and other specialty lines, as well as casualty and financial lines. The Insurance segment underwrites property, accident and health, agriculture, aviation, contingency, marine, and political lines insurance products; bankers blanket bond, commercial crime, computer crime, cyber- crime, professional indemnity, and directors' and officers' insurance products for various financial institutions and other companies; and commercial and institutional risks comprising general, professional, and product liability, as well as miscellaneous malpractice insurance products. This segment also underwrites marine and energy liability, and political risk insurance products, as well as insurance products for repair, maintenance, and upkeep of aircrafts and premises for small companies. The Asset Management segment manages capital for third parties through insurance-linked securities, and other property catastrophe and specialty reinsurance investments. Validus Holdings, Ltd. was founded in 2005 and is based in Pembroke, Bermuda.

Mercury General Company Profile

Mercury General Corporation, together with its subsidiaries, engages in writing personal automobile insurance in the United States. The company also writes homeowners, commercial automobile, commercial property, mechanical protection, fire, and umbrella insurance. Its automobile insurance products cover collision, property damage, bodily injury, comprehensive, personal injury protection, underinsured and uninsured motorist, and other hazards; and homeowners' insurance products cover dwelling, liability, personal property, fire, and other hazards. The company sells its policies through a network of independent agents, 100% owned insurance agents, and direct channels in Arizona, California, Florida, Georgia, Illinois, Nevada, New Jersey, New York, Oklahoma, Texas, and Virginia. Mercury General Corporation was founded in 1961 and is headquartered in Los Angeles, California.

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