Analyzing United Fire Group (UFCS) and EMC Insurance Group (EMCI)

United Fire Group (NASDAQ: UFCS) and EMC Insurance Group (NASDAQ:EMCI) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, institutional ownership, analyst recommendations, risk, valuation, dividends and profitability.

Analyst Ratings

This is a breakdown of recent ratings for United Fire Group and EMC Insurance Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
United Fire Group 0 2 1 0 2.33
EMC Insurance Group 0 1 0 0 2.00

United Fire Group presently has a consensus price target of $46.33, suggesting a potential upside of 13.79%. EMC Insurance Group has a consensus price target of $32.00, suggesting a potential upside of 15.48%. Given EMC Insurance Group’s higher possible upside, analysts clearly believe EMC Insurance Group is more favorable than United Fire Group.

Volatility & Risk

United Fire Group has a beta of 0.59, meaning that its share price is 41% less volatile than the S&P 500. Comparatively, EMC Insurance Group has a beta of 0.93, meaning that its share price is 7% less volatile than the S&P 500.

Institutional and Insider Ownership

58.6% of United Fire Group shares are owned by institutional investors. Comparatively, 28.1% of EMC Insurance Group shares are owned by institutional investors. 5.8% of United Fire Group shares are owned by insiders. Comparatively, 4.5% of EMC Insurance Group shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Dividends

United Fire Group pays an annual dividend of $1.12 per share and has a dividend yield of 2.8%. EMC Insurance Group pays an annual dividend of $0.88 per share and has a dividend yield of 3.2%. United Fire Group pays out 177.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. EMC Insurance Group pays out 54.3% of its earnings in the form of a dividend. EMC Insurance Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares United Fire Group and EMC Insurance Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
United Fire Group 1.49% 1.32% 0.30%
EMC Insurance Group 5.32% 4.99% 1.74%

Earnings & Valuation

This table compares United Fire Group and EMC Insurance Group’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
United Fire Group $1.14 billion 0.89 $49.90 million $0.63 64.64
EMC Insurance Group $640.91 million 0.93 $46.20 million $1.62 17.10

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

Summary

EMC Insurance Group beats United Fire Group on 9 of the 16 factors compared between the two stocks.

About United Fire Group

United Fire Group, Inc., formerly United Fire & Casualty Company, is engaged in the business of writing property and casualty insurance and life insurance and selling annuities. The Company operates in two segments: property and casualty insurance, and life insurance. The Company’s property and casualty insurance segment consists of commercial lines insurance, including surety bonds, personal lines insurance and assumed insurance. Its life insurance segment consists of deferred and immediate annuities, universal life insurance products and traditional life insurance products. Its life insurance segment consists solely of the operations of United Life Insurance Company. On February 1, 2012, the Company completed a holding company reorganization of United Fire Group, Inc., United Fire & Casualty Company and UFC MergeCo, Inc. On March 28, 2011, the Company acquired Mercer Insurance Group, Inc. (Mercer Insurance Group).

About EMC Insurance Group

EMC Insurance Group Inc. is an insurance holding company. The Company operates through two segments: Property and Casualty Insurance and Reinsurance segment. It conducts its property and casualty insurance operations through its subsidiaries, including EMCASCO Insurance Company, Illinois EMCASCO Insurance Company and Dakota Fire Insurance Company, and its reinsurance operations through its subsidiary, EMC Reinsurance Company. The Company focuses on the sale of commercial lines of property and casualty insurance to small and medium-sized businesses. The Company offered its insurance products in 41 states, as of December 31, 2016. The Company is owned by Employers Mutual Casualty Company (Employers Mutual), a multiple-line property and casualty insurance company. The Company’s insurance agency, EMC Underwriters, LLC (EMC Underwriters), specializes in marketing excess and surplus lines of insurance.

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