Analyzing American Financial Group (NYSE:AFG) and Travelers Companies (NYSE:TRV)

American Financial Group (NYSE:AFG) and Travelers Companies (NYSE:TRV) are both finance companies, but which is the better investment? We will contrast the two companies based on the strength of their profitability, dividends, institutional ownership, earnings, risk, analyst recommendations and valuation.

Earnings and Valuation

This table compares American Financial Group and Travelers Companies’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
American Financial Group $7.15 billion 1.32 $530.00 million $8.40 12.51
Travelers Companies $30.28 billion 1.32 $2.52 billion $8.94 17.05



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

Analyst Recommendations

This is a summary of current ratings and target prices for American Financial Group and Travelers Companies, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Financial Group 0 2 1 0 2.33
Travelers Companies 2 9 2 0 2.00

American Financial Group currently has a consensus target price of $113.50, suggesting a potential upside of 8.04%. Travelers Companies has a consensus target price of $143.32, suggesting a potential downside of 5.98%. Given American Financial Group’s stronger consensus rating and higher probable upside, equities analysts clearly believe American Financial Group is more favorable than Travelers Companies.

Profitability

This table compares American Financial Group and Travelers Companies’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Financial Group 9.45% 13.90% 1.14%
Travelers Companies 8.64% 10.86% 2.39%

Institutional and Insider Ownership

63.2% of American Financial Group shares are held by institutional investors. Comparatively, 80.6% of Travelers Companies shares are held by institutional investors. 11.9% of American Financial Group shares are held by company insiders. Comparatively, 0.7% of Travelers Companies shares are held by company 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.

Volatility and Risk

American Financial Group has a beta of 0.87, meaning that its stock price is 13% less volatile than the S&P 500. Comparatively, Travelers Companies has a beta of 0.96, meaning that its stock price is 4% less volatile than the S&P 500.

Dividends

American Financial Group pays an annual dividend of $1.60 per share and has a dividend yield of 1.5%. Travelers Companies pays an annual dividend of $3.28 per share and has a dividend yield of 2.2%. American Financial Group pays out 19.0% of its earnings in the form of a dividend. Travelers Companies pays out 36.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. American Financial Group has increased its dividend for 13 consecutive years and Travelers Companies has increased its dividend for 10 consecutive years.

Summary

Travelers Companies beats American Financial Group on 9 of the 17 factors compared between the two stocks.

About American Financial Group

American Financial Group, Inc., an insurance holding company, provides property and casualty insurance products in the United States. The company operates through three segments: Property and Casualty Insurance, Annuity, and Other. It offers property and transportation insurance products, such as physical damage and liability coverage for buses, trucks and recreational vehicles, inland and ocean marine, agricultural-related products, and other property; specialty casualty insurance, including primarily excess and surplus, general liability, executive liability, professional liability, umbrella and excess liability, and specialty coverage in targeted markets, as well as customized programs for small to mid-sized businesses and workers' compensation insurance; and specialty financial insurance products comprising risk management insurance programs for leasing and financing institutions, surety and fidelity products, and trade credit insurance. The company sells its property and casualty insurance products through independent insurance agents and brokers, as well as through employee agents. It also provides traditional fixed, fixed-indexed, and variable-indexed annuities to the retail, financial institutions, registered investment advisor, and education markets; and engages in the commercial real estate operations in Cincinnati, Whitefield, New Hampshire, Chesapeake Bay, Charleston, and Palm Beach. American Financial Group, Inc. was founded in 1872 and is headquartered in Cincinnati, Ohio.

About Travelers Companies

The Travelers Companies, Inc., through its subsidiaries, provides a range of commercial and personal property, and casualty insurance products and services to businesses, government units, associations, and individuals in the United states and internationally. The company operates through three segments: Business Insurance, Bond & Specialty Insurance, and Personal Insurance. The Business Insurance segment offers workers' compensation, commercial automobile and property, general liability, commercial multi-peril, employers' liability, public and product liability, professional indemnity, marine, aviation, onshore and offshore energy, construction, terrorism, personal accident, and kidnap and ransom insurance products. This segment operates through select accounts, which serve small businesses; commercial accounts that serve mid-sized businesses; national accounts, which serve large companies; and national property and other that serve large and mid-sized customers, commercial transportation industry, and agricultural businesses, as well as markets and distributes its products through brokers, wholesale agents, program managers, and specialized retail agents. The Bond & Specialty Insurance segment provides surety, fidelity, management and professional liability, and other property and casualty insurance products. The Personal Insurance segment offers property and casualty insurance covering personal risks, primarily automobile and homeowners insurance to individuals. The company distributes its products primarily through independent agencies and brokers. The Travelers Companies, Inc. was founded in 1853 and is based in New York, New York.

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