Critical Review: Sampo (OTCMKTS:SAXPY) versus Mercury General (NYSE:MCY)

Mercury General (NYSE:MCY) and Sampo (OTCMKTS:SAXPY) are both finance companies, but which is the superior business? We will compare the two businesses based on the strength of their analyst recommendations, valuation, institutional ownership, risk, profitability, dividends and earnings.

Analyst Ratings

This is a breakdown of current ratings and price targets for Mercury General and Sampo, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Mercury General	0	1	1	1	3.00
Sampo	0	1	0	1	3.00

Mercury General presently has a consensus target price of $100.00, indicating a potential upside of 16.75%. Given Mercury General’s higher possible upside, analysts clearly believe Mercury General is more favorable than Sampo.

Risk and Volatility

Mercury General has a beta of 0.98, suggesting that its stock price is 2% less volatile than the S&P 500. Comparatively, Sampo has a beta of 0.54, suggesting that its stock price is 46% less volatile than the S&P 500.

Dividends

Mercury General pays an annual dividend of $1.27 per share and has a dividend yield of 1.5%. Sampo pays an annual dividend of $0.32 per share and has a dividend yield of 1.4%. Mercury General pays out 18.0% of its earnings in the form of a dividend. Sampo pays out 31.7% 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. Mercury General is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Mercury General	6.76%	16.61%	3.65%
Sampo	N/A	19.63%	5.56%

Institutional and Insider Ownership

42.4% of Mercury General shares are held by institutional investors. Comparatively, 0.0% of Sampo shares are held by institutional investors. 35.5% of Mercury General shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares Mercury General and Sampo”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Mercury General	$5.48 billion	0.87	$467.95 million	$7.04	12.17
Sampo	$2.47 billion	49.65	$1.25 billion	$1.01	22.55

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

Summary

Mercury General beats Sampo on 10 of the 15 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 Sampo

Sampo Oyj, together with its subsidiaries, engages in the provision of non-life insurance products and services in Finland, Sweden, Norway, Denmark, Estonia, Lithuania, Latvia, and the United Kingdom. The company operates through If, Topdanmark, Hastings, Mandatum, and Holding segments. It offers property, casualty, liability, accident, sickness, household, homeowner, motor, travel, marine, aviation, transport, forest, livestock, health, workers compensation, car, van, and bike insurance services, as well as reinsurance services. The company was founded in 1909 and is based in Helsinki, Finland.