Critical Survey: The Hanover Insurance Group (NYSE:THG) & Donegal Group (NASDAQ:DGICA)

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

Profitability

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

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

Dividends

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

Analyst Recommendations

This is a summary of current ratings and price targets for Donegal Group and The Hanover Insurance Group, as reported by MarketBeat.

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

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

Valuation & Earnings

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

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

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.

Institutional & Insider Ownership

28.0% of Donegal Group shares are held by institutional investors. Comparatively, 86.6% of The Hanover Insurance Group shares are held by institutional investors. 2.8% of Donegal Group shares are held by company insiders. Comparatively, 2.8% of The Hanover Insurance Group shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Risk & Volatility

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

Summary

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

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.

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.