Contrasting United Fire Group (NASDAQ:UFCS) and Arthur J. Gallagher & Co. (NYSE:AJG)

Arthur J. Gallagher & Co. (NYSE:AJG) and United Fire Group (NASDAQ:UFCS) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, institutional ownership, valuation, risk and profitability.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Arthur J. Gallagher & Co. and United Fire Group, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Arthur J. Gallagher & Co.	0	5	14	0	2.74
United Fire Group	0	0	2	2	3.50

Arthur J. Gallagher & Co. currently has a consensus price target of $288.17, indicating a potential upside of 27.41%. United Fire Group has a consensus price target of $52.50, indicating a potential downside of 3.88%. Given Arthur J. Gallagher & Co.’s higher probable upside, research analysts clearly believe Arthur J. Gallagher & Co. is more favorable than United Fire Group.

Valuation & Earnings

This table compares Arthur J. Gallagher & Co. and United Fire Group”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Arthur J. Gallagher & Co.	$13.94 billion	4.16	$1.49 billion	$6.03	37.51
United Fire Group	$1.47 billion	0.95	$118.19 million	$5.38	10.15

Arthur J. Gallagher & Co. has higher revenue and earnings than United Fire Group. United Fire Group is trading at a lower price-to-earnings ratio than Arthur J. Gallagher & Co., indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Arthur J. Gallagher & Co. and United Fire Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Arthur J. Gallagher & Co.	9.96%	13.28%	4.03%
United Fire Group	9.57%	15.19%	3.69%

Insider & Institutional Ownership

85.5% of Arthur J. Gallagher & Co. shares are held by institutional investors. Comparatively, 62.7% of United Fire Group shares are held by institutional investors. 1.4% of Arthur J. Gallagher & Co. shares are held by insiders. Comparatively, 6.1% of United Fire Group shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Dividends

Arthur J. Gallagher & Co. pays an annual dividend of $2.80 per share and has a dividend yield of 1.2%. United Fire Group pays an annual dividend of $0.80 per share and has a dividend yield of 1.5%. Arthur J. Gallagher & Co. pays out 46.4% of its earnings in the form of a dividend. United Fire Group pays out 14.9% 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. Arthur J. Gallagher & Co. has increased its dividend for 15 consecutive years. United Fire Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

Arthur J. Gallagher & Co. has a beta of 0.55, suggesting that its stock price is 45% less volatile than the S&P 500. Comparatively, United Fire Group has a beta of 0.47, suggesting that its stock price is 53% less volatile than the S&P 500.

Summary

Arthur J. Gallagher & Co. beats United Fire Group on 12 of the 18 factors compared between the two stocks.

About Arthur J. Gallagher & Co.

Arthur J. Gallagher & Co. engages in the provision of insurance brokerage, reinsurance brokerage, consulting, and third-party claims settlement and administration services. It operates through the following segments: Brokerage, Risk Management, and Corporate. The Brokerage segment consists of retail and wholesale insurance brokerage operations. The Risk Management segment provides contract claim settlement and administration services. The Corporate segment manages clean energy and other investments. The company was founded by Arthur J. Gallagher in 1927 and is headquartered in Rolling Meadows, IL.

About United Fire Group

United Fire Group, Inc., together with its subsidiaries, provides property and casualty insurance for individuals and businesses in the United States. The company offers commercial and personal lines of property and casualty insurance; and reinsurance coverage for property and casualty insurance. Its commercial lines include fire and allied lines, other liability, automobile, workers’ compensation, fidelity and surety coverage, and other insurance products; and personal lines comprise automobile, and fire and allied lines coverage, including homeowners, as well as provides assumed reinsurance products. The company sells its products through a network of independent agencies. United Fire Group, Inc. was incorporated in 1946 and is headquartered in Cedar Rapids, Iowa.