Critical Analysis: Genworth Financial (NYSE:GNW) and Assured Guaranty (NYSE:AGO)

Genworth Financial (NYSE:GNW) and Assured Guaranty (NYSE:AGO) are both mid-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, earnings, risk, profitability, valuation, analyst recommendations and dividends.

Risk and Volatility

Genworth Financial has a beta of 0.88, meaning that its stock price is 12% less volatile than the S&P 500. Comparatively, Assured Guaranty has a beta of 0.73, meaning that its stock price is 27% less volatile than the S&P 500.

Insider and Institutional Ownership

81.8% of Genworth Financial shares are held by institutional investors. Comparatively, 92.2% of Assured Guaranty shares are held by institutional investors. 1.8% of Genworth Financial shares are held by insiders. Comparatively, 5.7% of Assured Guaranty shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent ratings for Genworth Financial and Assured Guaranty, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Genworth Financial	0	1	2	0	2.67
Assured Guaranty	0	2	3	0	2.60

Genworth Financial currently has a consensus price target of $11.50, indicating a potential upside of 20.61%. Assured Guaranty has a consensus price target of $91.00, indicating a potential upside of 33.08%. Given Assured Guaranty’s higher possible upside, analysts plainly believe Assured Guaranty is more favorable than Genworth Financial.

Earnings & Valuation

This table compares Genworth Financial and Assured Guaranty”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Genworth Financial	$7.30 billion	0.49	$223.00 million	$0.52	18.34
Assured Guaranty	$1.11 billion	2.71	$503.00 million	$7.50	9.12

Assured Guaranty has lower revenue, but higher earnings than Genworth Financial. Assured Guaranty is trading at a lower price-to-earnings ratio than Genworth Financial, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Genworth Financial and Assured Guaranty’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Genworth Financial	2.87%	1.06%	0.12%
Assured Guaranty	37.34%	7.11%	3.25%

Summary

Assured Guaranty beats Genworth Financial on 10 of the 14 factors compared between the two stocks.

About Genworth Financial

Genworth Financial, Inc., together with its subsidiaries, provides mortgage and long-term care insurance products in the United States and internationally. It operates in three segments: Enact, Long-Term Care Insurance, and Life and Annuities. The Enact segment offers private mortgage insurance products primarily insuring prime-based, individually underwritten residential mortgage loans; and pool mortgage insurance products. The Long-Term Care Insurance segment offers long-term care insurance products that are intended to protect against the significant and escalating costs of long-term care services provided in the insured's home, assisted living, and nursing facilities. The Life and Annuities segment provides protection and retirement income products, that includes traditional and non-traditional life insurance, such as term, universal and term universal life insurance, corporate-owned life insurance, and funding agreements; fixed annuities; and variable annuities. It distributes its products through sales force, in-house sales representatives, and digital marketing programs. The company was founded in 1871 and is headquartered in Richmond, Virginia.

About Assured Guaranty

Assured Guaranty Ltd., together with its subsidiaries, provides credit protection products to public finance, infrastructure, and structured finance markets in the United States and internationally. It operates through two segments: Insurance and Asset Management. The company offers financial guaranty insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments. It insures and reinsures various debt obligations, including bonds issued by the United States state governmental authorities; and notes issued to finance infrastructure projects. In addition, the company insures and reinsures various the U.S. public finance obligations, such as general obligation, tax-backed, municipal utility, transportation, healthcare, higher education, infrastructure, housing revenue, investor-owned utility, renewable energy, and other public finance bonds. Further, the company involved in insuring and reinsuring of non-U.S. public finance obligations comprising regulated utilities, infrastructure finance, sovereign and sub-sovereign, renewable energy bonds, pooled infrastructure, and other public finance obligations; and the U.S. and non-U.S. Structured finance obligations, including residential mortgage-backed securities, life insurance transactions, consumer receivables securities, subscription finance facilities, pooled corporate obligations, and financial products. Additionally, it offers specialty business, such as real estate properties, insurance securitizations, and aircraft residual value insurance (RVI) transactions; and asset management services comprising investment advisory services. It markets its financial guaranty insurance directly to issuers and underwriters of public finance and structured finance securities, as well as to investors in such obligations. Assured Guaranty Ltd. was incorporated in 2003 and is headquartered in Hamilton, Bermuda.