Contrasting Cincinnati Financial (CINF) and State Auto Financial (STFC)

State Auto Financial (NASDAQ: STFC) and Cincinnati Financial (NASDAQ:CINF) are both finance companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, dividends, risk, analyst recommendations, institutional ownership, valuation and earnings.

Valuation and Earnings

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This table compares State Auto Financial and Cincinnati Financial’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
State Auto Financial $1.42 billion 0.85 -$10.70 million ($0.40) -70.30
Cincinnati Financial $5.73 billion 2.07 $1.05 billion $2.74 26.41

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

Analyst Ratings

This is a breakdown of current recommendations and price targets for State Auto Financial and Cincinnati Financial, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
State Auto Financial 0 1 0 0 2.00
Cincinnati Financial 0 3 0 0 2.00

State Auto Financial currently has a consensus price target of $26.00, suggesting a potential downside of 7.54%. Cincinnati Financial has a consensus price target of $71.00, suggesting a potential downside of 1.89%. Given Cincinnati Financial’s higher probable upside, analysts clearly believe Cincinnati Financial is more favorable than State Auto Financial.

Profitability

This table compares State Auto Financial and Cincinnati Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
State Auto Financial -0.75% -1.85% -0.55%
Cincinnati Financial 18.23% 5.99% 2.13%

Dividends

State Auto Financial pays an annual dividend of $0.40 per share and has a dividend yield of 1.4%. Cincinnati Financial pays an annual dividend of $2.12 per share and has a dividend yield of 2.9%. State Auto Financial pays out -100.0% of its earnings in the form of a dividend. Cincinnati Financial pays out 77.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Cincinnati Financial has raised its dividend for 57 consecutive years. Cincinnati Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

State Auto Financial has a beta of 0.84, suggesting that its stock price is 16% less volatile than the S&P 500. Comparatively, Cincinnati Financial has a beta of 0.84, suggesting that its stock price is 16% less volatile than the S&P 500.

Institutional and Insider Ownership

34.7% of State Auto Financial shares are held by institutional investors. Comparatively, 63.3% of Cincinnati Financial shares are held by institutional investors. 2.0% of State Auto Financial shares are held by company insiders. Comparatively, 7.1% of Cincinnati Financial 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.

Summary

Cincinnati Financial beats State Auto Financial on 13 of the 14 factors compared between the two stocks.

State Auto Financial Company Profile

State Auto Financial Corporation, through its subsidiaries, engages in writing personal, business, and specialty insurance products. It operates through four segments: Personal Insurance, Commercial Insurance, Specialty Insurance, and Investment Operations. The Personal Insurance segment primarily provides personal automobile, homeowners insurance, and other personal insurance products. The commercial insurance segment primarily provides commercial automobile, commercial multi-peril, fire and allied, general liability, and workers' compensation insurance covering small-to-medium sized commercial insurance market, as well as farm and ranch insurance. The Specialty Insurance segment provides commercial coverages that require specialized product underwriting, claims handling, or risk management services. This segment markets and underwrites specialized property exposures with a focus on catastrophe exposed risks covering property, and general liability; markets and underwrites commercial auto, healthcare, umbrella, property, and general liability coverages; and markets and distributes homogenous risks covering commercial auto, general liability, and property. The Investment Operations segment provides investment management services to affiliated insurance companies. The company markets its products primarily through independent agencies, including retail agencies and wholesale brokers. The company was founded in 1950 and is headquartered in Columbus, Ohio. State Auto Financial Corporation is a subsidiary of State Automobile Mutual Insurance Company.

Cincinnati Financial Company Profile

Cincinnati Financial Corporation provides property casualty insurance products in the United States. The company operates in five segments: Commercial Lines Insurance, Personal Lines Insurance, Excess and Surplus Lines Insurance, Life Insurance, and Investments. The Commercial Lines Insurance segment provides coverage for commercial casualty, commercial property, commercial auto, and workers' compensation. It also offers director and officer liability insurance, contract and commercial surety bonds, and fidelity bonds; coverage for property, liability, and business interruption; and machinery and equipment coverage. The Personal Lines Insurance segment provides personal auto insurance; homeowners insurance; and dwelling fire, inland marine, personal umbrella liability, and watercraft coverages to individuals. The Excess and Surplus Lines Insurance segment offers commercial casualty insurance that covers businesses for third-party liability from accidents occurring on their premises or arising out of their operations, such as injuries sustained from products; and commercial property insurance, which insures buildings, inventory, equipment, and business income from loss or damage due to causes, such as fire, wind, hail, water, theft, and vandalism. The Life Insurance segment provides term life insurance products; universal life insurance products; worksite products, such as term life, whole life, and disability insurance offered to employees through their employer; and whole life insurance products, as well as markets disability income insurance, deferred annuities, and immediate annuities. The Investments segment invests in fixed-maturity investments, including taxable and tax-exempt bonds, and redeemable preferred stocks; and equity investments comprising common and nonredeemable preferred stocks. The company also offers commercial leasing and financing services. Cincinnati Financial Corporation was founded in 1950 and is headquartered in Fairfield, Ohio.

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