National General Holdings Corp. (NASDAQ:NGHC) and The Progressive Corporation (NASDAQ:PGR) are both Financial companies that recently hit new low. This price action has ruffled more than a few feathers in the investment community, but is one a better investment than the other? To answer this, we will compare the two companies across growth, profitability, risk, return, dividends, and valuation measures.
National General Holdings Corp. (NASDAQ:NGHC) operates in the Property & Casualty Insurance segment of the Financial sector. The company has grown sales at a 42.60% annual rate over the past five years, putting it in the high growth category. NGHC has a net profit margin of 1.90% and is more profitable than the average company in the Property & Casualty Insurance industry. In terms of efficiency, NGHC has an asset turnover ratio of 0.58. This figure represents the amount of revenue a company generates per dollar of assets. NGHC’s financial leverage ratio is 2.98, which indicates that the company’s asset base is primarily funded by debt. Company’s return on equity, which is really just the product of the company’s profit margin, asset turnover, and financial leverage ratios, is 5.30%, which is worse than the Property & Casualty Insurance industry average ROE.
National General Holdings Corp. (NGHC) pays out an annual dividend of 0.16 per share. At the current valuation, this equates to a dividend yield of 0.78%. The company has a payout ratio of 21.30%. NGHC’s current dividend therefore should be sustainable. Stock’s free cash flow yield, which represents the amount of cash available to investors before dividends, expressed as a percentage of the stock price, is 1.75. All else equal, companies with higher FCF yields are viewed as cheaper. Company trades at a P/E ratio of 28.16, and is more expensive than the average stock in the Property & Casualty Insurance industry. The average investment recommendation for NGHC, taken from a group of Wall Street Analysts, is 2.00, or a buy.
Over the past three months, National General Holdings Corp. insiders have been net sellers, acquiring a net of 19,420 shares. This implies that insiders have been feeling relatively bullish about the outlook for NGHC. Insider activity and sentiment signals are important to monitor because they can shed light on how “risky” a stock is perceived to be at it’s current valuation. Knowing this, it makes sense to look at beta, a measure of market risk. NGHC has a beta of 1.32 and therefore an above average level of market volatility.
The Progressive Corporation (NYSE:PGR) operates in the Property & Casualty Insurance segment of the Financial sector. PGR has increased sales at a 8.20% CAGR over the past five years, and is considered a medium growth stock. The company has a net profit margin of 5.50% and is more profitable than the average Property & Casualty Insurance player. PGR’s asset turnover ratio is 0.72 and the company has financial leverage of 3.08. PGR’s return on equity of 16.40% is better than the Property & Casualty Insurance industry average.
The Progressive Corporation (PGR) pays a dividend of 0.68, which translates to dividend yield of 1.38% based on the current price. Stock has a payout ratio of 37.50%. According to this ratio, PGR should be able to continue making payouts at these levels. The company trades at a free cash flow yield of 3.05 and has a P/E of 21.01. Compared to the average company in the 12.51 space, PGR is relatively expensive. The average analyst recommendation for PGR is 2.40, or a buy. The average analyst recommendation for PGR is 2.40, or a buy.
The Progressive Corporation insiders have bought a net of 500,186 shares during the past three months, which implies that the company’s top executives have been feeling bullish about the stock’s outlook. Finally, PGR’s beta of 0.91 indicates that the stock has an above average level of market risk.
National General Holdings Corp. (NYSE:PGR) scores higher than The Progressive Corporation (NASDAQ:NGHC) on 9 of the 13 measures compared between the two companies. PGR has the better fundamentals, scoring higher on profitability, efficiency and return metrics. PGR wins on valuation measures. PGR has better insider activity and sentiment signals.