Critical Comparison: Homeowners Choice (HCI) vs. Atlantic American (AAME)

Atlantic American (NASDAQ: AAME) and Homeowners Choice (NYSE:HCI) are both small-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their institutional ownership, profitability, dividends, valuation, earnings, risk and analyst recommendations.

Analyst Recommendations

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This is a breakdown of current recommendations for Atlantic American and Homeowners Choice, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Atlantic American 0 0 0 0 N/A
Homeowners Choice 0 1 2 0 2.67

Homeowners Choice has a consensus price target of $46.00, suggesting a potential upside of 20.55%. Given Homeowners Choice’s higher probable upside, analysts plainly believe Homeowners Choice is more favorable than Atlantic American.

Earnings and Valuation

This table compares Atlantic American and Homeowners Choice’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Atlantic American $181.11 million 0.37 $4.52 million N/A N/A
Homeowners Choice $244.41 million 1.48 -$6.89 million ($0.75) -50.88

Atlantic American has higher earnings, but lower revenue than Homeowners Choice.

Profitability

This table compares Atlantic American and Homeowners Choice’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Atlantic American 2.50% -3.71% -1.22%
Homeowners Choice -2.82% -3.21% -0.80%

Volatility and Risk

Atlantic American has a beta of 0.55, meaning that its share price is 45% less volatile than the S&P 500. Comparatively, Homeowners Choice has a beta of 1.87, meaning that its share price is 87% more volatile than the S&P 500.

Institutional & Insider Ownership

5.1% of Atlantic American shares are held by institutional investors. Comparatively, 70.4% of Homeowners Choice shares are held by institutional investors. 79.3% of Atlantic American shares are held by insiders. Comparatively, 20.4% of Homeowners Choice shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Dividends

Atlantic American pays an annual dividend of $0.02 per share and has a dividend yield of 0.6%. Homeowners Choice pays an annual dividend of $1.40 per share and has a dividend yield of 3.7%. Homeowners Choice pays out -186.7% of its earnings in the form of a dividend. Homeowners Choice has raised its dividend for 4 consecutive years. Homeowners Choice is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Homeowners Choice beats Atlantic American on 11 of the 14 factors compared between the two stocks.

About Atlantic American

Atlantic American Corporation is a holding company that operates through its subsidiaries in specialty markets within the life and health, and property and casualty insurance industries. The Company’s principal operating subsidiaries are American Southern Insurance Company and American Safety Insurance Company (together known as American Southern) within the property and casualty insurance industry, and Bankers Fidelity Life Insurance Company and Bankers Fidelity Assurance Company (together known as Bankers Fidelity) within the life and health insurance industry. Each of American Southern and Bankers Fidelity is managed separately based upon the type of products it offers. American Southern’s product lines include business automobile insurance policies, General Liability Insurance policies, Property Insurance policies and Surety Bonds. Products offered by Bankers Fidelity include ordinary and term life insurance, Medicare supplement and other accident and health insurance products.

About Homeowners Choice

HCI Group, Inc. primarily engages in the property and casualty insurance business in Florida. It provides property and casualty insurance to homeowners, condominium owners, and tenants; and reinsurance. The company also owns and operates one full-service restaurant, two marinas, two retail shopping centers, and one office building. In addition, it offers designs and develops Web-based applications and products for mobile devices. The company was formerly known as Homeowners Choice, Inc. and changed its name to HCI Group, Inc. in May 2013. HCI Group, Inc. was incorporated in 2006 and is headquartered in Tampa, Florida.

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