Erie Indemnity (NASDAQ:ERIE) versus Travelers Companies (TRV) Financial Analysis

Erie Indemnity (NASDAQ: ERIE) and Travelers Companies (NYSE:TRV) are both mid-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, profitability, earnings, dividends, risk and institutional ownership.

Analyst Ratings

This is a summary of current recommendations and price targets for Erie Indemnity and Travelers Companies, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Erie Indemnity 0 0 0 0 N/A
Travelers Companies 3 7 7 0 2.24

Travelers Companies has a consensus target price of $128.70, suggesting a potential downside of 5.62%. Given Travelers Companies’ higher possible upside, analysts clearly believe Travelers Companies is more favorable than Erie Indemnity.

Volatility & Risk

Erie Indemnity has a beta of 0.47, indicating that its share price is 53% less volatile than the S&P 500. Comparatively, Travelers Companies has a beta of 1.25, indicating that its share price is 25% more volatile than the S&P 500.

Dividends

Erie Indemnity pays an annual dividend of $3.13 per share and has a dividend yield of 2.6%. Travelers Companies pays an annual dividend of $2.88 per share and has a dividend yield of 2.1%. Erie Indemnity pays out 77.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Travelers Companies pays out 33.4% of its earnings in the form of a dividend. Erie Indemnity has raised its dividend for 21 consecutive years and Travelers Companies has raised its dividend for 8 consecutive years. Erie Indemnity is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

30.9% of Erie Indemnity shares are held by institutional investors. Comparatively, 78.5% of Travelers Companies shares are held by institutional investors. 46.8% of Erie Indemnity shares are held by company insiders. Comparatively, 0.8% of Travelers Companies shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Erie Indemnity and Travelers Companies’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Erie Indemnity $1.60 billion 3.53 $210.36 million $4.02 30.37
Travelers Companies $27.63 billion 1.35 $3.01 billion $8.61 15.84

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

Profitability

This table compares Erie Indemnity and Travelers Companies’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Erie Indemnity 12.62% 24.98% 13.51%
Travelers Companies 8.56% 9.87% 2.28%

Erie Indemnity Company Profile

Erie Indemnity Company is a management company. The Company serves as the attorney-in-fact for the subscribers (policyholders) at the Erie Insurance Exchange (Exchange). The Exchange is a reciprocal insurer that writes property and casualty insurance. The Company’s function is to perform certain services for the Exchange relating to the sales, underwriting and issuance of policies on behalf of the Exchange. The sales related services the Company provides include agent compensation, and certain sales and advertising support services. Agent compensation includes scheduled commissions to agents based upon premiums written, as well as additional commissions and bonuses to agents. The underwriting services the Company provides include underwriting and policy processing expenses. It provides information technology services that supports various functions. The remaining services the Company provides include customer service and administrative costs.

Travelers Companies Company Profile

The Travelers Companies, Inc. is a holding company. The Company’s segments include Business and International Insurance; Bond & Specialty Insurance, and Personal Insurance. Through its subsidiaries, it provides commercial and personal property and casualty insurance products and services. The Business and International Insurance segment offers property and casualty insurance and insurance related services to its clients, in the United States and in Canada, as well as in the United Kingdom, the Republic of Ireland, Brazil and throughout other parts of the world. The Bond & Specialty Insurance segment provides surety, fidelity, management liability, professional liability, and other property and casualty coverages and related risk management services to a range of primarily domestic customers, utilizing various degrees of financially-based underwriting approaches. The Personal Insurance segment writes a range of property and casualty insurance covering individuals’ personal risks.

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