The Travelers Companies (NYSE:TRV) and State Auto Financial (NASDAQ:STFC) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their earnings, profitability, analyst recommendations, dividends, institutional ownership, valuation and risk.
Analyst Ratings
This is a breakdown of recent ratings and price targets for The Travelers Companies and State Auto Financial, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
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The Travelers Companies | 3 | 10 | 5 | 0 | 2.11 |
State Auto Financial | 0 | 2 | 1 | 0 | 2.33 |
The Travelers Companies presently has a consensus target price of $135.20, indicating a potential downside of 7.08%. State Auto Financial has a consensus target price of $22.00, indicating a potential upside of 17.40%. Given State Auto Financial's stronger consensus rating and higher probable upside, analysts clearly believe State Auto Financial is more favorable than The Travelers Companies.
Earnings & Valuation
This table compares The Travelers Companies and State Auto Financial's top-line revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
---|
The Travelers Companies | $31.58 billion | 1.16 | $2.62 billion | $9.60 | 15.16 |
State Auto Financial | $1.41 billion | 0.58 | $87.40 million | $0.63 | 29.75 |
The Travelers Companies has higher revenue and earnings than State Auto Financial. The Travelers Companies is trading at a lower price-to-earnings ratio than State Auto Financial, indicating that it is currently the more affordable of the two stocks.
Volatility and Risk
The Travelers Companies has a beta of 0.77, indicating that its share price is 23% less volatile than the S&P 500. Comparatively, State Auto Financial has a beta of 0.19, indicating that its share price is 81% less volatile than the S&P 500.
Insider and Institutional Ownership
81.8% of The Travelers Companies shares are owned by institutional investors. Comparatively, 33.5% of State Auto Financial shares are owned by institutional investors. 0.8% of The Travelers Companies shares are owned by company insiders. Comparatively, 2.0% of State Auto Financial shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.
Profitability
This table compares The Travelers Companies and State Auto Financial's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
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The Travelers Companies | 7.13% | 8.63% | 2.04% |
State Auto Financial | -2.56% | -2.64% | -0.81% |
Dividends
The Travelers Companies pays an annual dividend of $3.40 per share and has a dividend yield of 2.3%. State Auto Financial pays an annual dividend of $0.40 per share and has a dividend yield of 2.1%. The Travelers Companies pays out 35.4% of its earnings in the form of a dividend. State Auto Financial pays out 63.5% 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. The Travelers Companies has increased its dividend for 16 consecutive years. The Travelers Companies is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Summary
The Travelers Companies beats State Auto Financial on 14 of the 17 factors compared between the two stocks.