Financial Contrast: Sompo (OTCMKTS:SMPNY) vs. MGIC Investment (NYSE:MTG)

MGIC Investment (NYSE:MTG) and Sompo (OTCMKTS:SMPNY) are both finance companies, but which is the better business? We will contrast the two companies based on the strength of their risk, profitability, earnings, dividends, analyst recommendations, valuation and institutional ownership.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
MGIC Investment	60.84%	14.33%	11.21%
Sompo	10.62%	13.26%	3.54%

Institutional & Insider Ownership

95.6% of MGIC Investment shares are owned by institutional investors. 1.1% of MGIC Investment shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent recommendations for MGIC Investment and Sompo, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MGIC Investment	0	4	1	0	2.20
Sompo	0	0	0	0	0.00

MGIC Investment currently has a consensus price target of $28.00, indicating a potential upside of 7.61%. Given MGIC Investment’s stronger consensus rating and higher possible upside, research analysts plainly believe MGIC Investment is more favorable than Sompo.

Dividends

MGIC Investment pays an annual dividend of $0.60 per share and has a dividend yield of 2.3%. Sompo pays an annual dividend of $0.29 per share and has a dividend yield of 1.6%. MGIC Investment pays out 19.1% of its earnings in the form of a dividend. Sompo pays out 14.1% 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 increased 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.

Earnings & Valuation

This table compares MGIC Investment and Sompo”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MGIC Investment	$1.21 billion	4.61	$738.35 million	$3.14	8.29
Sompo	$35.81 billion	0.96	$2.79 billion	$2.05	8.99

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

Volatility and Risk

MGIC Investment has a beta of 0.83, suggesting that its stock price is 17% less volatile than the S&P 500. Comparatively, Sompo has a beta of 0.38, suggesting that its stock price is 62% less volatile than the S&P 500.

Summary

MGIC Investment beats Sompo on 13 of the 17 factors compared between the two stocks.

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.

About Sompo

Sompo Holdings, Inc. provides property and casualty (P&C) insurance services in Japan and internationally. The company operates through Domestic P&C Insurance Business, Overseas Insurance Business, Domestic Life Insurance Business, and Nursing Care & Seniors Business segments. It offers various P&C insurance products, including automobile, fire, personal accident, and marine, as well as security, risk management, assistance, and warranty services; and life insurance products. The company also provides nursing care and seniors services; and customer security, health, and wellbeing support services. In addition, it offers asset management services; home remodeling services; and health support services comprising health guidance and employee assistance programs. The company was formerly known as Sompo Japan Nipponkoa Holdings, Inc. and changed its name to Sompo Holdings, Inc. in October 2016. The company was incorporated in 2010 and is headquartered in Tokyo, Japan.