Financial Analysis: Prudential Financial (NYSE:PRU) and Employers (NYSE:EIG)

Prudential Financial (NYSE:PRU) and Employers (NYSE:EIG) are both finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, earnings, analyst recommendations, risk, dividends, institutional ownership and profitability.

Dividends

Prudential Financial pays an annual dividend of $5.60 per share and has a dividend yield of 4.5%. Employers pays an annual dividend of $1.36 per share and has a dividend yield of 2.8%. Prudential Financial pays out 51.0% of its earnings in the form of a dividend. Employers pays out 80.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Prudential Financial has increased its dividend for 18 consecutive years and Employers has increased its dividend for 4 consecutive years. Prudential Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Prudential Financial and Employers’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Prudential Financial	6.75%	16.38%	0.67%
Employers	3.49%	5.82%	1.49%

Insider and Institutional Ownership

56.8% of Prudential Financial shares are held by institutional investors. Comparatively, 80.5% of Employers shares are held by institutional investors. 0.1% of Prudential Financial shares are held by company insiders. Comparatively, 1.3% of Employers shares are held by company 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.

Earnings & Valuation

This table compares Prudential Financial and Employers”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Prudential Financial	$57.68 billion	0.74	$3.58 billion	$10.99	11.26
Employers	$858.70 million	0.98	$10.80 million	$1.69	28.49

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

Analyst Ratings

This is a summary of current ratings and price targets for Prudential Financial and Employers, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Prudential Financial	6	9	2	0	1.76
Employers	0	2	1	0	2.33

Prudential Financial currently has a consensus price target of $112.40, suggesting a potential downside of 9.16%. Employers has a consensus price target of $59.00, suggesting a potential upside of 22.54%. Given Employers’ stronger consensus rating and higher probable upside, analysts plainly believe Employers is more favorable than Prudential Financial.

Risk & Volatility

Prudential Financial has a beta of 0.85, suggesting that its stock price is 15% less volatile than the S&P 500. Comparatively, Employers has a beta of 0.5, suggesting that its stock price is 50% less volatile than the S&P 500.

Summary

Prudential Financial beats Employers on 10 of the 17 factors compared between the two stocks.

About Prudential Financial

Prudential Financial, Inc. is a financial services company headquartered in Newark, New Jersey. Founded in 1875 as the Prudential Friendly Society, it has grown into a provider of insurance, retirement and investment services. The company offers life insurance, annuities, workplace benefits and retirement-related products and services. Through its asset management businesses, Prudential also serves individual and institutional investors. Prudential serves customers in the United States and operates internationally, with a significant presence in Japan and other markets.

About Employers

Employers Holdings, Inc. is a specialty insurance company focused primarily on workers’ compensation coverage for small and mid-sized businesses. Through its insurance subsidiaries, the company provides policies designed to help employers meet workplace injury coverage requirements and manage workers’ compensation risks. Employers distributes its products mainly through independent insurance agents and offers related services such as claims handling, workplace safety and loss-control support, and premium auditing.