Financial Analysis: Fidelity and Guaranty Life (FGL) & Emergent Capital (EMGC)

Emergent Capital (OTCMKTS: EMGC) and Fidelity and Guaranty Life (NYSE:FGL) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, institutional ownership, earnings, risk, dividends and valuation.

Dividends

Fidelity and Guaranty Life pays an annual dividend of $0.26 per share and has a dividend yield of 0.8%. Emergent Capital does not pay a dividend. Fidelity and Guaranty Life pays out 6.8% of its earnings in the form of a dividend.

Insider and Institutional Ownership

20.6% of Fidelity and Guaranty Life shares are owned by institutional investors. 33.3% of Emergent Capital shares are owned by company insiders. Comparatively, 0.6% of Fidelity and Guaranty Life shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares Emergent Capital and Fidelity and Guaranty Life’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Emergent Capital -42.49% -12.80% -3.98%
Fidelity and Guaranty Life 14.02% 11.22% 0.85%

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Emergent Capital and Fidelity and Guaranty Life, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Emergent Capital 0 0 1 0 3.00
Fidelity and Guaranty Life 0 1 0 0 2.00

Fidelity and Guaranty Life has a consensus target price of $26.80, indicating a potential downside of 13.83%. Given Fidelity and Guaranty Life’s higher probable upside, analysts clearly believe Fidelity and Guaranty Life is more favorable than Emergent Capital.

Volatility & Risk

Emergent Capital has a beta of 0.04, suggesting that its share price is 96% less volatile than the S&P 500. Comparatively, Fidelity and Guaranty Life has a beta of 0.88, suggesting that its share price is 12% less volatile than the S&P 500.

Earnings and Valuation

This table compares Emergent Capital and Fidelity and Guaranty Life’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Emergent Capital $1.12 million 54.29 -$49.68 million ($0.98) -0.40
Fidelity and Guaranty Life $1.53 billion 1.20 $223.00 million $3.82 8.14

Fidelity and Guaranty Life has higher revenue and earnings than Emergent Capital. Emergent Capital is trading at a lower price-to-earnings ratio than Fidelity and Guaranty Life, indicating that it is currently the more affordable of the two stocks.

Summary

Fidelity and Guaranty Life beats Emergent Capital on 10 of the 15 factors compared between the two stocks.

About Emergent Capital

Emergent Capital, Inc., formerly Imperial Holdings, Inc., is a specialty finance company that invests in asset classes, primarily life settlements. The Company, through its subsidiary companies, owns a portfolio of approximately 630 life insurance policies (life settlements). The Company purchases individual policies and portfolios of life insurance policies and manages those assets based on actuarial and market data. The Company provides customized liquidity solutions to owners of illiquid financial assets in two markets, which include life finance and structured settlements. The Company focuses on lending to outright purchases of portfolios, to tertiary trades, as well as individual secondary market purchases. The Company invests in short and long-term life settlement investments.

About Fidelity and Guaranty Life

Fidelity & Guaranty Life (FGL) is a holding company focused on obtaining controlling equity stakes in companies that operate across various industries. FGL’s primary business is the sale of individual life insurance products and annuities through independent agents, managing general agents, and specialty brokerage firms and in selected institutional markets. FGL’s principal products are deferred annuities (including fixed indexed annuity (FIA) contracts), immediate annuities and life insurance products. FGL markets products through its insurance subsidiaries, Fidelity & Guaranty Life Insurance Company (FGL Insurance) and Fidelity & Guaranty Life Insurance Company of New York (FGL NY Insurance). It distributes and services primarily fixed rate annuities, including FIAs. The Company provides FIA’s for pre-retirement wealth accumulation and post-retirement income management. Its life insurance provides wealth protection and transfer opportunities through indexed universal life products.

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