The Travelers Companies (NYSE:TRV) and First American Financial (NYSE:FAF) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, profitability, dividends, risk, valuation, analyst recommendations and institutional ownership.
Profitability
This table compares The Travelers Companies and First American Financial's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
---|
The Travelers Companies | 5.81% | 7.20% | 1.68% |
First American Financial | 9.61% | 13.06% | 4.91% |
Earnings & Valuation
This table compares The Travelers Companies and First American Financial's gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
---|
The Travelers Companies | $31.58 billion | 1.15 | $2.62 billion | $9.60 | 14.92 |
First American Financial | $6.20 billion | 0.95 | $707.41 million | $5.76 | 9.20 |
The Travelers Companies has higher revenue and earnings than First American Financial. First American Financial is trading at a lower price-to-earnings ratio than The Travelers Companies, indicating that it is currently the more affordable of the two stocks.
Institutional and Insider Ownership
81.3% of The Travelers Companies shares are owned by institutional investors. Comparatively, 83.3% of First American Financial shares are owned by institutional investors. 0.8% of The Travelers Companies shares are owned by insiders. Comparatively, 3.0% of First American Financial shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.
Volatility & Risk
The Travelers Companies has a beta of 0.85, suggesting that its share price is 15% less volatile than the S&P 500. Comparatively, First American Financial has a beta of 1.13, suggesting that its share price is 13% more volatile than the S&P 500.
Dividends
The Travelers Companies pays an annual dividend of $3.40 per share and has a dividend yield of 2.4%. First American Financial pays an annual dividend of $1.84 per share and has a dividend yield of 3.5%. The Travelers Companies pays out 35.4% of its earnings in the form of a dividend. First American Financial pays out 31.9% 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. The Travelers Companies has raised its dividend for 15 consecutive years. First American Financial is clearly the better dividend stock, given its higher yield and lower payout ratio.
Analyst Ratings
This is a summary of recent ratings and price targets for The Travelers Companies and First American Financial, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
---|
The Travelers Companies | 3 | 11 | 4 | 0 | 2.06 |
First American Financial | 0 | 1 | 4 | 0 | 2.80 |
The Travelers Companies presently has a consensus target price of $127.60, suggesting a potential downside of 10.92%. First American Financial has a consensus target price of $59.80, suggesting a potential upside of 12.83%. Given First American Financial's stronger consensus rating and higher possible upside, analysts clearly believe First American Financial is more favorable than The Travelers Companies.
Summary
First American Financial beats The Travelers Companies on 10 of the 16 factors compared between the two stocks.