Donegal Group (NASDAQ:DGICA) versus Mercury General (NYSE:MCY) Critical Comparison

Donegal Group (NASDAQ:DGICA – Get Rating) and Mercury General (NYSE:MCY – Get Rating) are both small-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their risk, valuation, institutional ownership, earnings, dividends, profitability and analyst recommendations.

Valuation and Earnings

This table compares Donegal Group and Mercury General’s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Donegal Group	$848.22 million	0.58	-$1.96 million	($0.32)	-46.31
Mercury General	$3.64 billion	0.46	-$512.67 million	($6.52)	-4.68

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Donegal Group	-1.14%	-0.34%	-0.07%
Mercury General	-9.15%	-10.88%	-2.58%

Dividends

Donegal Group pays an annual dividend of $0.68 per share and has a dividend yield of 4.6%. Mercury General pays an annual dividend of $1.27 per share and has a dividend yield of 4.2%. Donegal Group pays out -212.5% of its earnings in the form of a dividend. Mercury General pays out -19.5% 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. Donegal Group has raised its dividend for 10 consecutive years. Donegal Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of current ratings and recommmendations for Donegal Group and Mercury General, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Donegal Group	0	0	0	0	N/A
Mercury General	0	0	0	1	4.00

Mercury General has a consensus target price of $40.00, suggesting a potential upside of 31.15%. Given Mercury General’s higher probable upside, analysts plainly believe Mercury General is more favorable than Donegal Group.

Insider & Institutional Ownership

28.6% of Donegal Group shares are owned by institutional investors. Comparatively, 42.5% of Mercury General shares are owned by institutional investors. 6.6% of Donegal Group shares are owned by insiders. Comparatively, 35.5% of Mercury General shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Summary

Donegal Group beats Mercury General on 9 of the 15 factors compared between the two stocks.

About Donegal Group

(Get Rating)

Donegal Group, Inc. is an insurance holding company, which engages in the provision of property and casualty insurance to businesses and individuals. It operates through the following segments: Investment Function, Personal Lines of Insurance, and Commercial Lines of Insurance. The Investment Function segment covers investment activities. The Personal Lines of Insurance segment consists of homeowners and private passenger automobile policies. The Commercial Lines of Insurance segment includes commercial automobile, commercial multi-peril, and workers compensation policies. The company was founded on August 26, 1986 and is headquartered in Marietta, PA.

About Mercury General

(Get Rating)

Mercury General Corp. operates as a broker and agency writer of automobile insurance. The firm engages in writing personal automobile insurance and provides related property and casualty insurance products to its customers. Its insurance products include private passenger automobile and related insurance products such as homeowners, commercial automobile and commercial property. The company was founded by George Joseph in 1961 and is headquartered in Los Angeles, CA.