State Auto Financial (NASDAQ:STFC) and Safety Insurance Group (NASDAQ:SAFT) are both small-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, profitability, institutional ownership, earnings, dividends, risk and analyst recommendations.

Profitability

This table compares State Auto Financial and Safety Insurance Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
State Auto Financial 4.87% 6.86% 2.01%
Safety Insurance Group 12.25% 14.41% 5.55%

Dividends

State Auto Financial pays an annual dividend of $0.40 per share and has a dividend yield of 1.1%. Safety Insurance Group pays an annual dividend of $3.20 per share and has a dividend yield of 3.3%. State Auto Financial pays out 33.3% of its earnings in the form of a dividend. Safety Insurance Group has increased its dividend for 2 consecutive years. Safety Insurance Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for State Auto Financial and Safety Insurance Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
State Auto Financial 0 1 0 0 2.00
Safety Insurance Group 0 0 0 0 N/A

State Auto Financial currently has a consensus price target of $30.00, indicating a potential downside of 15.40%. Given State Auto Financial’s higher probable upside, analysts plainly believe State Auto Financial is more favorable than Safety Insurance Group.

Valuation and Earnings

This table compares State Auto Financial and Safety Insurance Group’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
State Auto Financial $1.28 billion 1.21 $12.80 million $1.20 29.55
Safety Insurance Group $836.50 million 1.77 $83.19 million N/A N/A

Safety Insurance Group has lower revenue, but higher earnings than State Auto Financial.

Insider and Institutional Ownership

33.5% of State Auto Financial shares are owned by institutional investors. Comparatively, 81.3% of Safety Insurance Group shares are owned by institutional investors. 1.8% of State Auto Financial shares are owned by company insiders. Comparatively, 4.8% of Safety Insurance Group shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Risk & Volatility

State Auto Financial has a beta of 0.35, meaning that its stock price is 65% less volatile than the S&P 500. Comparatively, Safety Insurance Group has a beta of 0.62, meaning that its stock price is 38% less volatile than the S&P 500.

Summary

Safety Insurance Group beats State Auto Financial on 11 of the 14 factors compared between the two stocks.

State Auto Financial Company Profile

State Auto Financial Corporation, through its subsidiaries, engages in writing personal and business insurance products. It operates through four segments: Personal Insurance, Commercial Insurance, Specialty Insurance, and Investment Operations. The Personal Insurance segment primarily provides personal automobile, homeowners insurance, and other personal insurance products. The commercial insurance segment primarily provides commercial automobile, commercial multi-peril, fire and allied, general liability, and workers' compensation insurance covering small-to-medium sized commercial insurance market, as well as farm and ranch insurance. The Specialty Insurance segment provides commercial coverages that require specialized product underwriting, claims handling, or risk management services. The Investment Operations segment provides investment management services to affiliated insurance companies. The company markets its products primarily through independent agencies, including retail agencies and wholesale brokers. The company was founded in 1950 and is headquartered in Columbus, Ohio. State Auto Financial Corporation is a subsidiary of State Automobile Mutual Insurance Company.

Safety Insurance Group Company Profile

Safety Insurance Group, Inc. provides private passenger and commercial automobile insurance in Massachusetts, New Hampshire, and Maine, the United States. The company's private passenger automobile policies offer coverage for bodily injury and property damage to others, no-fault personal injury coverage for the insured/insured's car occupants, and physical damage coverage for an insured's own vehicle for collision or other perils. It also provides commercial automobile policies that offer insurance for commercial vehicles used for business purposes, including private passenger-type vehicles, trucks, tractors and trailers, insure individual vehicles, and commercial fleets; and homeowners policies, which provide coverage for homes, condominiums, and apartments for losses to a dwelling and its contents from various perils, and coverage for liability to others arising from ownership or occupancy. In addition, the company offers business owners policies that cover apartments and residential condominiums, restaurants, office condominiums, processing and services businesses, special trade contractors, and wholesalers. Further, it provides personal umbrella policies, which provide personal excess liability coverage over and above the limits of individual automobile, watercraft, and homeowner's insurance policies; and commercial umbrella policies, as well as underwrites dwelling fire insurance for non-owner occupied residences. Additionally, the company offers inland marine coverage for homeowners and business owner policies; and watercraft coverage for small and medium sized pleasure crafts. It distributes its products through independent agents. The company was formerly known as Safety Holdings Inc and changed its name to Safety Insurance Group, Inc. in April 2002. Safety Insurance Group, Inc. was founded in 1979 and is based in Boston, Massachusetts.

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