Analyzing Direct Line Insurance Group (OTCMKTS:DIISY) & Donegal Group (NASDAQ:DGICA)

Donegal Group (NASDAQ:DGICA) and Direct Line Insurance Group (OTCMKTS:DIISY) are both financial services companies, but which is the superior stock? We will contrast the two companies based on the strength of their profitability, dividends, earnings, risk, valuation, analyst recommendations and institutional ownership.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Donegal Group	0.76%	0.89%	0.19%
Direct Line Insurance Group	N/A	N/A	N/A

Institutional & Insider Ownership

28.0% of Donegal Group shares are owned by institutional investors. Comparatively, 0.3% of Direct Line Insurance Group shares are owned by institutional investors. 6.6% of Donegal Group shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares Donegal Group and Direct Line Insurance Group”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Donegal Group	$961.31 million	0.52	$4.43 million	$0.16	94.44
Direct Line Insurance Group	N/A	N/A	N/A	$0.90	10.56

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

Dividends

Donegal Group pays an annual dividend of $0.69 per share and has a dividend yield of 4.6%. Direct Line Insurance Group pays an annual dividend of $0.48 per share and has a dividend yield of 5.1%. Donegal Group pays out 431.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Direct Line Insurance Group pays out 54.1% of its earnings in the form of a dividend. Donegal Group has increased its dividend for 20 consecutive years. Direct Line Insurance Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of current ratings and price targets for Donegal Group and Direct Line Insurance Group, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Donegal Group	0	1	0	0	2.00
Direct Line Insurance Group	0	0	0	0	N/A

Donegal Group presently has a consensus price target of $15.00, indicating a potential downside of 0.92%. Given Donegal Group’s higher possible upside, analysts clearly believe Donegal Group is more favorable than Direct Line Insurance Group.

Summary

Donegal Group beats Direct Line Insurance Group on 9 of the 12 factors compared between the two stocks.

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.

About Direct Line Insurance Group

Direct Line Insurance Group plc engages in the provision of general insurance products and services in the United Kingdom. The company operates through Motor, Home, Rescue and Other Personal Lines, and Commercial segments. It offers motor, home, van, landlord, rescue, pet, tradesperson, business, creditor and select, and travel insurance products, as well as commercial insurance for small and medium-sized enterprises. The company also provides management, motor accident vehicle repair, insurance intermediary, support and operational, legal, software development, and breakdown recovery services. It sells its insurance products directly, through price comparison websites and phone, and through partners and brokers under the Direct Line, Churchill, Privilege, Darwin, Green Flag, Direct Line for Business, DLG Partnerships, DLG Auto Services, and DLG Legal Services brands. The company was formerly known as RBS Insurance Group Limited and changed its name to Direct Line Insurance Group plc in February 2012. Direct Line Insurance Group plc was founded in 1985 and is based in Bromley, the United Kingdom.