Critical Contrast: United Fire Group (NASDAQ:UFCS) and HCI Group (NYSE:HCI)

United Fire Group (NASDAQ:UFCS) and HCI Group (NYSE:HCI) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, profitability, earnings, analyst recommendations, valuation, risk and dividends.

Risk and Volatility

United Fire Group has a beta of 0.47, suggesting that its stock price is 53% less volatile than the S&P 500. Comparatively, HCI Group has a beta of 1.05, suggesting that its stock price is 5% more volatile than the S&P 500.

Profitability

This table compares United Fire Group and HCI Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
United Fire Group	9.57%	15.19%	3.69%
HCI Group	32.60%	28.80%	12.25%

Insider & Institutional Ownership

62.7% of United Fire Group shares are owned by institutional investors. Comparatively, 87.0% of HCI Group shares are owned by institutional investors. 6.1% of United Fire Group shares are owned by insiders. Comparatively, 18.5% of HCI Group shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares United Fire Group and HCI Group”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
United Fire Group	$1.47 billion	0.99	$118.19 million	$5.38	10.56
HCI Group	$900.95 million	2.73	$299.01 million	$23.20	8.54

HCI Group has lower revenue, but higher earnings than United Fire Group. HCI Group is trading at a lower price-to-earnings ratio than United Fire Group, indicating that it is currently the more affordable of the two stocks.

Dividends

United Fire Group pays an annual dividend of $0.80 per share and has a dividend yield of 1.4%. HCI Group pays an annual dividend of $1.60 per share and has a dividend yield of 0.8%. United Fire Group pays out 14.9% of its earnings in the form of a dividend. HCI Group pays out 6.9% 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.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for United Fire Group and HCI Group, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
United Fire Group	0	0	2	2	3.50
HCI Group	0	1	5	1	3.00

United Fire Group presently has a consensus price target of $52.50, suggesting a potential downside of 7.62%. HCI Group has a consensus price target of $241.67, suggesting a potential upside of 22.02%. Given HCI Group’s higher probable upside, analysts clearly believe HCI Group is more favorable than United Fire Group.

Summary

HCI Group beats United Fire Group on 12 of the 17 factors compared between the two stocks.

About United Fire Group

United Fire Group, Inc., together with its subsidiaries, provides property and casualty insurance for individuals and businesses in the United States. The company offers commercial and personal lines of property and casualty insurance; and reinsurance coverage for property and casualty insurance. Its commercial lines include fire and allied lines, other liability, automobile, workers’ compensation, fidelity and surety coverage, and other insurance products; and personal lines comprise automobile, and fire and allied lines coverage, including homeowners, as well as provides assumed reinsurance products. The company sells its products through a network of independent agencies. United Fire Group, Inc. was incorporated in 1946 and is headquartered in Cedar Rapids, Iowa.

About HCI Group

HCI Group, Inc., together with its subsidiaries, engages in the property and casualty insurance, insurance management, reinsurance, real estate, and information technology businesses in Florida. It provides residential insurance products, such as homeowners, fire, flood, and wind-only insurance to homeowners, condominium owners, and tenants for properties, as well as offers reinsurance programs. The company also owns and operates waterfront properties and retail shopping centers, and an office building, as well as commercial properties for investment purposes. In addition, it designs and develops web-based applications and products for mobile devices, including SAMS, an online policy administration platform; Harmony, a policy administration platform; ClaimColony, an end-to-end claims management platform; and AtlasViewer, a mapping and data visualization platform. The company was formerly known as Homeowners Choice, Inc. and changed its name to HCI Group, Inc. in May 2013. HCI Group, Inc. was incorporated in 2006 and is headquartered in Tampa, Florida.