First American Financial (NYSE:FAF – Get Rating) and Argo Group International (NASDAQ:ARGO – Get Rating) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their risk, dividends, profitability, earnings, analyst recommendations, valuation and institutional ownership.
Analyst Ratings
This is a breakdown of current ratings and recommmendations for First American Financial and Argo Group International, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| First American Financial | 0 | 1 | 4 | 0 | 2.80 |
| Argo Group International | 0 | 0 | 0 | 0 | N/A |
First American Financial presently has a consensus price target of $58.88, suggesting a potential upside of 8.88%. Given First American Financial’s higher possible upside, equities analysts plainly believe First American Financial is more favorable than Argo Group International.
Valuation & Earnings
This table compares First American Financial and Argo Group International’s revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| First American Financial | $9.22 billion | 0.61 | $1.24 billion | $4.24 | 12.75 |
| Argo Group International | $2.13 billion | 0.44 | $6.70 million | ($5.53) | -4.87 |
First American Financial has higher revenue and earnings than Argo Group International. Argo Group International is trading at a lower price-to-earnings ratio than First American Financial, indicating that it is currently the more affordable of the two stocks.
Insider & Institutional Ownership
87.2% of First American Financial shares are owned by institutional investors. Comparatively, 90.5% of Argo Group International shares are owned by institutional investors. 3.2% of First American Financial shares are owned by insiders. Comparatively, 1.0% of Argo Group International shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.
Dividends
First American Financial pays an annual dividend of $2.08 per share and has a dividend yield of 3.8%. Argo Group International pays an annual dividend of $1.24 per share and has a dividend yield of 4.6%. First American Financial pays out 49.1% of its earnings in the form of a dividend. Argo Group International pays out -22.4% 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. First American Financial has raised its dividend for 11 consecutive years. Argo Group International is clearly the better dividend stock, given its higher yield and lower payout ratio.
Volatility & Risk
First American Financial has a beta of 1.22, meaning that its share price is 22% more volatile than the S&P 500. Comparatively, Argo Group International has a beta of 0.97, meaning that its share price is 3% less volatile than the S&P 500.
Profitability
This table compares First American Financial and Argo Group International’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| First American Financial | 5.66% | 14.89% | 4.67% |
| Argo Group International | -9.58% | 2.59% | 0.36% |
Summary
First American Financial beats Argo Group International on 13 of the 16 factors compared between the two stocks.
About First American Financial
First American Financial Corporation, through its subsidiaries, provides financial services. It operates through Title Insurance and Services, and Specialty Insurance segments. The Title Insurance and Services segment issues title insurance policies on residential and commercial property, as well as offers related products and services. This segment also provides closing and/or escrow services; products, services, and solutions to mitigate risk or otherwise facilitate real estate transactions; and appraisals and other valuation-related products and services, lien release and document custodial services, warehouse lending services, default-related products and services, mortgage subservicing, and related products and services, as well as banking, trust, and wealth management services. In addition, it accommodates tax-deferred exchanges of real estate; and maintains, manages, and provides access to title plant data and records. This segment offers its products through a network of direct operations and agents in 49 states and in the District of Columbia, as well as in Canada, the United Kingdom, Australia, South Korea, and internationally. The Specialty Insurance segment provides property and casualty insurance comprising coverage to residential homeowners and renters for liability losses and typical hazards, such as fire, theft, vandalism, and other types of property damage. It also offers residential service contracts that cover residential systems, such as heating and air conditioning systems, and appliances against failures that occur as the result of normal usage during the coverage period. First American Financial Corporation was founded in 1889 and is headquartered in Santa Ana, California.
About Argo Group International
Argo Group International Holdings, Ltd. underwrites specialty insurance and reinsurance products in the property and casualty markets. The company operates in two segments, U.S. Operations and International Operations. It offers primary and excess specialty casualty, general liability, commercial multi-peril, and workers compensation, as well as product, environmental, and auto liability insurance products; management liability, transaction liability, and errors and omissions liability insurance; primary and excess property, inland marine, and auto physical damage insurance; and surety, animal mortality, and ocean marine insurance products. The company also provides directors and officers liability, errors and omissions liability, and employment practices liability insurance; international casualty and motor treaties insurance; professional indemnity and medical malpractice insurance; direct and facultative excess insurance, North American and international binders, and residential collateral protection for lending institutions; and personal accident, aviation, cargo, yachts, and onshore and offshore marine insurance products. It markets its products through wholesale and retail agents, managing general agents, brokers, and third-party intermediaries. The company was founded in 1948 and is headquartered in Pembroke, Bermuda.
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