Investors are weighing options between two mid-cap finance firms: The Hanover Insurance Group (NYSE: THG) and Stewart Information Services (NYSE: STC). Both companies offer diverse financial services, but their performance metrics and market positions reveal differing strengths and investment viability.
Comparative Analysis of Analyst Ratings
Current analyst recommendations indicate a preference for Stewart Information Services over The Hanover Insurance Group. According to MarketBeat, The Hanover Insurance Group has a consensus target price of $195.83, reflecting a potential upside of 6.06%. In contrast, Stewart Information Services holds a target price of $77.50, with a more promising upside of 8.52%. This suggests that analysts view Stewart as the more favorable investment, given its higher potential returns.
Financial Performance and Valuation Metrics
A direct comparison of earnings and valuation reveals that The Hanover Insurance Group outperforms Stewart Information Services in key revenue metrics. The Hanover generated a gross revenue of $6.24 billion and a net income of $426 million, leading to an earnings per share (EPS) of $17.29. Its price-to-earnings (P/E) ratio stands at 10.68.
In contrast, Stewart Information Services reported gross revenue of $2.49 billion, with a net income of $73.31 million and an EPS of $3.59. The P/E ratio for Stewart is significantly higher at 19.89, indicating that investors currently pay more for each dollar of earnings compared to The Hanover.
Profitability metrics further illustrate the differences. The Hanover Insurance Group boasts a net margin of 9.71%, with a return on equity of 21.73% and return on assets at 4.30%. On the other hand, Stewart Information Services has a net margin of 3.65%, a return on equity of 8.57%, and a return on assets of 4.45%.
Volatility associated with these stocks also varies. The Hanover’s beta of 0.33 suggests a significantly lower volatility compared to the S&P 500, while Stewart’s beta of 1.04 indicates a slight increase in volatility.
Dividends and Ownership Structure
In terms of shareholder returns, The Hanover Insurance Group offers an annual dividend of $3.80 per share, yielding 2.1%. This represents a payout ratio of 22.0% of its earnings. Stewart Information Services provides a smaller annual dividend of $2.10 per share, with a higher yield of 2.9% and a payout ratio of 58.5%. Both companies maintain healthy payout ratios, suggesting sustainability for their dividend payments.
Institutional ownership also plays a significant role in assessing long-term growth potential. Approximately 86.6% of The Hanover’s shares are held by institutional investors, whereas Stewart Information Services boasts an even higher institutional ownership at 96.9%. Insider ownership shows that 2.5% of The Hanover’s shares are held by company insiders, compared to 1.5% for Stewart.
Conclusion: Who Comes Out on Top?
While The Hanover Insurance Group leads in several critical financial metrics, including revenue and net income, Stewart Information Services offers a higher potential upside and a more attractive dividend yield for investors seeking immediate returns.
Overall, The Hanover Insurance Group excels in profitability and lower volatility, making it a strong candidate for conservative investors. Conversely, Stewart Information Services may appeal to those willing to accept higher risk for potentially greater rewards. Each company presents unique advantages, and investor preferences will ultimately dictate which stock aligns with their financial goals.
Both firms have established their presence in the finance sector, with The Hanover founded in 1852 and headquartered in Worcester, Massachusetts, while Stewart Information Services was established in 1893 and is based in Houston, Texas.
