Head-To-Head Contrast: Essent Group (NYSE:ESNT) versus Mercury General (NYSE:MCY)

Mercury General (NYSE:MCY) and Essent Group (NYSE:ESNT) are both mid-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their risk, earnings, analyst recommendations, valuation, profitability, dividends and institutional ownership.

Insider and Institutional Ownership

42.4% of Mercury General shares are owned by institutional investors. Comparatively, 93.0% of Essent Group shares are owned by institutional investors. 35.5% of Mercury General shares are owned by insiders. Comparatively, 2.9% of Essent Group shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares Mercury General and Essent Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Mercury General	7.55%	19.53%	4.35%
Essent Group	55.63%	12.40%	9.73%

Dividends

Mercury General pays an annual dividend of $1.27 per share and has a dividend yield of 1.4%. Essent Group pays an annual dividend of $1.24 per share and has a dividend yield of 1.9%. Mercury General pays out 16.0% of its earnings in the form of a dividend. Essent Group pays out 18.0% 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. Essent Group has increased its dividend for 6 consecutive years. Essent Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of current ratings for Mercury General and Essent Group, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Mercury General	0	0	1	2	3.67
Essent Group	1	4	5	0	2.40

Mercury General currently has a consensus price target of $100.00, suggesting a potential upside of 10.55%. Essent Group has a consensus price target of $67.86, suggesting a potential upside of 3.54%. Given Mercury General’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Mercury General is more favorable than Essent Group.

Risk & Volatility

Mercury General has a beta of 0.93, indicating that its stock price is 7% less volatile than the S&P 500. Comparatively, Essent Group has a beta of 0.9, indicating that its stock price is 10% less volatile than the S&P 500.

Earnings and Valuation

This table compares Mercury General and Essent Group”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Mercury General	$5.82 billion	0.86	$467.95 million	$7.93	11.41
Essent Group	$1.29 billion	4.91	$729.40 million	$6.87	9.54

Essent Group has lower revenue, but higher earnings than Mercury General. Essent Group is trading at a lower price-to-earnings ratio than Mercury General, indicating that it is currently the more affordable of the two stocks.

Summary

Mercury General beats Essent Group on 10 of the 18 factors compared between the two stocks.

About Mercury General

Mercury General Corporation, together with its subsidiaries, engages in writing personal automobile insurance in the United States. The company also writes homeowners, commercial automobile, commercial property, mechanical protection, and umbrella insurance products. Its automobile insurance products include collision, property damage, bodily injury, comprehensive, personal injury protection, underinsured and uninsured motorist, and other hazards; and homeowners insurance products comprise dwelling, liability, personal property, and other coverages. The company sells its policies through a network of independent agents, insurance agencies, as well as directly through internet sales portals in Arizona, California, Florida, Georgia, Illinois, Nevada, New Jersey, New York, Oklahoma, Texas, and Virginia. Mercury General Corporation was founded in 1961 and is headquartered in Los Angeles, California.

About Essent Group

Essent Group Ltd., through its subsidiaries, provides private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. Its mortgage insurance products include primary, pool, and master policy. The company also provides information technology maintenance and development services; customer support-related services; underwriting consulting; and contract underwriting services, as well as risk management products and title insurance and settlement services. It serves the originators of residential mortgage loans, such as regulated depository institutions, mortgage banks, credit unions, and other lenders. Essent Group Ltd. was incorporated in 2008 and is based in Hamilton, Bermuda.