Contrasting RLI (RLI) & Donegal Group (DGICA)

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

Dividends

RLI pays an annual dividend of $0.84 per share and has a dividend yield of 1.4%. Donegal Group pays an annual dividend of $0.56 per share and has a dividend yield of 3.2%. RLI pays out 46.7% of its earnings in the form of a dividend. Donegal Group pays out 98.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. RLI has raised its dividend for 40 consecutive years.

Analyst Recommendations

This is a summary of current ratings and target prices for RLI and Donegal Group, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
RLI 1 3 0 0 1.75
Donegal Group 0 0 2 0 3.00

RLI presently has a consensus price target of $53.00, suggesting a potential downside of 11.80%. Donegal Group has a consensus price target of $19.50, suggesting a potential upside of 10.92%. Given Donegal Group’s stronger consensus rating and higher possible upside, analysts clearly believe Donegal Group is more favorable than RLI.

Profitability

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

Net Margins Return on Equity Return on Assets
RLI 9.97% 8.53% 2.57%
Donegal Group 2.13% 2.81% 0.75%

Institutional & Insider Ownership

83.6% of RLI shares are held by institutional investors. Comparatively, 29.3% of Donegal Group shares are held by institutional investors. 6.1% of RLI shares are held by insiders. Comparatively, 11.9% of Donegal Group shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Risk and Volatility

RLI has a beta of 1.3, indicating that its stock price is 30% more volatile than the S&P 500. Comparatively, Donegal Group has a beta of 0.3, indicating that its stock price is 70% less volatile than the S&P 500.

Valuation & Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
RLI $816.33 million 3.24 $114.92 million $1.80 33.38
Donegal Group $688.42 million 0.70 $30.80 million $0.57 30.84

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

Summary

RLI beats Donegal Group on 12 of the 17 factors compared between the two stocks.

RLI Company Profile

RLI Corp. is a specialty insurance company. The Company underwrites selected property and casualty insurance through subsidiaries, as well as offers insurance coverages in both the specialty admitted, and excess and surplus markets. It operates through Casualty, Property and Surety segments. Its Casualty segment consists of commercial and personal umbrella, general liability, commercial transportation, professional services, small commercial, executive products, medical professional liability and other casualty businesses. Its property segment consists of commercial property, marine, specialty personal, property reinsurance and crop reinsurance businesses. Its surety segment consists of miscellaneous, commercial, contract and energy businesses. The Company conducts its operations principally through three insurance companies: RLI Insurance Company (RLI Ins.), Mt. Hawley Insurance Company (Mt. Hawley) and Contractors Bonding and Insurance Company (CBIC).

Donegal Group Company Profile

Donegal Group Inc. (DGI) is an insurance holding company whose insurance subsidiaries offer personal and commercial lines of property and casualty insurance. The Company offered its insurance business to various businesses and individuals in 21 Mid-Atlantic, Midwestern, New England and Southern states, as of December 31, 2016. It has four segments: investment function, personal lines of insurance, commercial lines of insurance and investment in Donegal Financial Services Corporation (DFSC). Its insurance operations include two segments: personal lines of insurance and commercial lines of insurance. The personal lines of insurance, which its insurance subsidiaries write consists of private passenger automobile and homeowners insurance. The commercial lines of insurance, which its insurance subsidiaries write consists of commercial automobile, commercial multi-peril and workers’ compensation insurance. It holds interests in DFSC, which is a unitary savings and loan holding company.

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