Critical Contrast: Donegal Group (NASDAQ:DGICA) & Aflac (NYSE:AFL)

Aflac (NYSE:AFL) and Donegal Group (NASDAQ:DGICA) are both finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their earnings, analyst recommendations, institutional ownership, dividends, risk, valuation and profitability.

Analyst Ratings

This is a summary of current recommendations for Aflac and Donegal Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Aflac	3	7	2	2	2.21
Donegal Group	0	2	2	0	2.50

Aflac currently has a consensus target price of $116.62, suggesting a potential downside of 0.04%. Donegal Group has a consensus target price of $20.00, suggesting a potential upside of 3.95%. Given Donegal Group’s stronger consensus rating and higher possible upside, analysts clearly believe Donegal Group is more favorable than Aflac.

Volatility and Risk

Aflac has a beta of 0.6, suggesting that its stock price is 40% less volatile than the S&P 500. Comparatively, Donegal Group has a beta of -0.01, suggesting that its stock price is 101% less volatile than the S&P 500.

Valuation & Earnings

This table compares Aflac and Donegal Group”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Aflac	$17.16 billion	3.41	$3.65 billion	$9.33	12.50
Donegal Group	$978.01 million	0.73	$79.34 million	$1.93	9.97

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

Profitability

This table compares Aflac and Donegal Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Aflac	26.91%	13.27%	3.34%
Donegal Group	7.38%	10.65%	2.83%

Institutional and Insider Ownership

67.4% of Aflac shares are owned by institutional investors. Comparatively, 28.0% of Donegal Group shares are owned by institutional investors. 0.8% of Aflac shares are owned by company insiders. Comparatively, 2.8% of Donegal Group shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

Aflac pays an annual dividend of $2.44 per share and has a dividend yield of 2.1%. Donegal Group pays an annual dividend of $0.77 per share and has a dividend yield of 4.0%. Aflac pays out 26.2% of its earnings in the form of a dividend. Donegal Group pays out 39.9% 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. Aflac has raised its dividend for 44 consecutive years and Donegal Group has raised its dividend for 5 consecutive years.

Summary

Aflac beats Donegal Group on 13 of the 17 factors compared between the two stocks.

About Aflac

Aflac Incorporated, through its subsidiaries, provides supplemental health and life insurance products. The company operates through Aflac Japan and Aflac U.S. segments. The Aflac Japan segment offers cancer, medical, nursing care, work leave, GIFT, and whole and term life insurance products, as well as WAYS and child endowment plans under saving type insurance products in Japan. The Aflac U.S. segment provides cancer, accident, short-term disability, critical illness, hospital indemnity, dental, vision, long-term care and disability, and term and whole life insurance products in the United States. It sells its products through sales associates, brokers, independent corporate agencies, individual agencies, and affiliated corporate agencies. Aflac Incorporated was founded in 1955 and is headquartered in Columbus, Georgia.

About Donegal Group

Donegal Group Inc., an insurance holding company, provides property and casualty insurance to businesses and individuals. It operates through three segments: Investment Function, Personal Lines of Insurance, and Commercial Lines of Insurance. The company offers private passenger automobile policies that provide protection against liability for bodily injury and property damage arising from automobile accidents, as well as protection against loss from damage to automobiles; and homeowners policies, which provide coverage for damage to residences and their contents from a range of perils, including fire, lightning, windstorm, and theft, as well as liability of the insured arising from injury to other persons or their property. It also offers commercial automobile policies that provide protection against liability for bodily injury and property damage arising from automobile accidents and protection against loss from damage to automobiles owned by the insured; commercial multi-peril policies that provide protection to businesses against combining liability and physical damage coverages; and workers’ compensation policies, which provide benefits to employees for injuries sustained during employment. The company markets its insurance products primarily to Mid-Atlantic, Midwestern, New England, Southern, and Southwestern regions through independent insurance agencies. Donegal Group Inc. was incorporated in 1986 and is based in Marietta, Pennsylvania. Donegal Group Inc. operates as a subsidiary of Donegal Mutual Insurance Company.