Contrasting Donegal Group (NASDAQ:DGICA) and The Hanover Insurance Group (NYSE:THG)

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

Analyst Ratings

This is a summary of recent ratings and recommmendations for The Hanover Insurance Group and Donegal Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
The Hanover Insurance Group	0	5	3	2	2.70
Donegal Group	0	2	1	0	2.33

The Hanover Insurance Group currently has a consensus price target of $236.62, indicating a potential downside of 5.03%. Donegal Group has a consensus price target of $20.00, indicating a potential upside of 5.37%. Given Donegal Group’s higher possible upside, analysts clearly believe Donegal Group is more favorable than The Hanover Insurance Group.

Institutional and Insider Ownership

86.6% of The Hanover Insurance Group shares are held by institutional investors. Comparatively, 28.0% of Donegal Group shares are held by institutional investors. 2.8% of The Hanover Insurance Group shares are held by company insiders. Comparatively, 2.8% of Donegal Group shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Risk & Volatility

The Hanover Insurance Group has a beta of 0.24, indicating that its share price is 76% less volatile than the S&P 500. Comparatively, Donegal Group has a beta of -0.03, indicating that its share price is 103% less volatile than the S&P 500.

Earnings & Valuation

This table compares The Hanover Insurance Group and Donegal Group”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
The Hanover Insurance Group	$6.59 billion	1.30	$662.50 million	$20.91	11.92
Donegal Group	$978.01 million	0.72	$79.34 million	$1.87	10.15

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

Dividends

The Hanover Insurance Group pays an annual dividend of $3.80 per share and has a dividend yield of 1.5%. Donegal Group pays an annual dividend of $0.77 per share and has a dividend yield of 4.1%. The Hanover Insurance Group pays out 18.2% of its earnings in the form of a dividend. Donegal Group pays out 41.2% 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. The Hanover Insurance Group has raised its dividend for 20 consecutive years and Donegal Group has raised its dividend for 5 consecutive years.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
The Hanover Insurance Group	10.97%	21.63%	4.58%
Donegal Group	7.24%	10.45%	2.79%

Summary

The Hanover Insurance Group beats Donegal Group on 16 of the 18 factors compared between the two stocks.

About The Hanover Insurance Group

The Hanover Insurance Group, Inc. is a property and casualty insurer founded in 1852 as the Hanover Fire Insurance Company. Headquartered in Worcester, Massachusetts, it provides insurance products and services primarily in the United States. The company offers personal insurance, including coverage for homes and automobiles, as well as commercial insurance for businesses. Its commercial offerings include coverage for small and midsize businesses and specialty risks. The Hanover distributes its products mainly through independent insurance agents and brokers, working with them to serve individuals, families, and businesses.

About Donegal Group

Donegal Group Inc. is an insurance holding company that provides property and casualty insurance through its subsidiaries. Its offerings include personal lines such as automobile and homeowners insurance, as well as commercial coverage for businesses, including commercial automobile, workers’ compensation and package policies. The company distributes its products primarily through independent insurance agencies. Its operations serve customers in the Mid-Atlantic region and other parts of the eastern, southern and Midwestern United States.