Critical Analysis: MGIC Investment (NYSE:MTG) vs. James River Group (NASDAQ:JRVR)

James River Group (NASDAQ:JRVR) and MGIC Investment (NYSE:MTG) are both finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their valuation, risk, profitability, institutional ownership, dividends, earnings and analyst recommendations.

Profitability

This table compares James River Group and MGIC Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
James River Group	4.34%	10.79%	1.13%
MGIC Investment	59.63%	14.01%	10.96%

Valuation and Earnings

This table compares James River Group and MGIC Investment”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
James River Group	$687.61 million	0.28	$47.43 million	$0.34	12.21
MGIC Investment	$1.20 billion	4.54	$738.35 million	$3.15	8.21

MGIC Investment has higher revenue and earnings than James River Group. MGIC Investment is trading at a lower price-to-earnings ratio than James River Group, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings for James River Group and MGIC Investment, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
James River Group	2	4	0	0	1.67
MGIC Investment	0	4	1	0	2.20

James River Group currently has a consensus target price of $7.00, indicating a potential upside of 68.67%. MGIC Investment has a consensus target price of $28.25, indicating a potential upside of 9.18%. Given James River Group’s higher probable upside, equities research analysts clearly believe James River Group is more favorable than MGIC Investment.

Volatility & Risk

James River Group has a beta of -0.03, meaning that its stock price is 103% less volatile than the S&P 500. Comparatively, MGIC Investment has a beta of 0.71, meaning that its stock price is 29% less volatile than the S&P 500.

Dividends

James River Group pays an annual dividend of $0.04 per share and has a dividend yield of 1.0%. MGIC Investment pays an annual dividend of $0.60 per share and has a dividend yield of 2.3%. James River Group pays out 11.8% of its earnings in the form of a dividend. MGIC Investment pays out 19.0% 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. MGIC Investment has raised its dividend for 6 consecutive years. MGIC Investment is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

95.2% of James River Group shares are owned by institutional investors. Comparatively, 95.6% of MGIC Investment shares are owned by institutional investors. 33.8% of James River Group shares are owned by insiders. Comparatively, 1.3% of MGIC Investment shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Summary

MGIC Investment beats James River Group on 13 of the 17 factors compared between the two stocks.

About James River Group

James River Group Holdings, Ltd., through its subsidiaries, provides specialty insurance services. It operates through Excess and Surplus Lines, and Specialty Admitted Insurance segments. The Excess and Surplus Lines segment underwrites liability and property insurance in the United States Puerto Rice, and the United States Virgin Islands. This segment distributes its insurance policies primarily through wholesale insurance brokers. The Specialty Admitted Insurance segment provides insurance for fronting, program administrators, managing general agents, and independent retail agents. James River Group Holdings, Ltd. was founded in 2002 and is headquartered in Pembroke, Bermuda.

About MGIC Investment

MGIC Investment Corporation, through its subsidiaries, provides private mortgage insurance, other mortgage credit risk management solutions, and ancillary services to lenders and government sponsored entities in the United States, the District of Columbia, Puerto Rico, and Guam. The company offers primary mortgage insurance that provides mortgage default protection on individual loans, as well as covers unpaid loan principal, delinquent interest, and various expenses associated with the default and subsequent foreclosure. It also provides pool insurance for secondary market mortgage transactions; and contract underwriting services, as well as reinsurance. The company serves originators of residential mortgage loans, including savings institutions, commercial banks, mortgage brokers, credit unions, mortgage bankers, and other lenders. MGIC Investment Corporation was founded in 1957 and is headquartered in Milwaukee, Wisconsin.