Financial Contrast: Donegal Group (NASDAQ:DGICA) versus Goosehead Insurance (NASDAQ:GSHD)

Goosehead Insurance (NASDAQ:GSHD) and Donegal Group (NASDAQ:DGICA) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, profitability, valuation, dividends, analyst recommendations and risk.

Analyst Ratings

This is a breakdown of current recommendations for Goosehead Insurance and Donegal Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Goosehead Insurance	1	7	6	1	2.47
Donegal Group	1	1	1	0	2.00

Goosehead Insurance presently has a consensus target price of $66.27, suggesting a potential upside of 52.74%. Donegal Group has a consensus target price of $20.00, suggesting a potential upside of 9.95%. Given Goosehead Insurance’s stronger consensus rating and higher probable upside, analysts clearly believe Goosehead Insurance is more favorable than Donegal Group.

Insider & Institutional Ownership

28.0% of Donegal Group shares are owned by institutional investors. 38.1% of Goosehead Insurance shares are owned by insiders. Comparatively, 2.8% of Donegal Group shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Risk and Volatility

Goosehead Insurance has a beta of 1.46, indicating that its stock price is 46% more volatile than the S&P 500. Comparatively, Donegal Group has a beta of -0.03, indicating that its stock price is 103% less volatile than the S&P 500.

Earnings & Valuation

This table compares Goosehead Insurance and Donegal Group”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Goosehead Insurance	$402.16 million	3.83	$27.83 million	$1.37	31.67
Donegal Group	$963.18 million	1.25	$79.34 million	$1.93	9.42

Donegal Group has higher revenue and earnings than Goosehead Insurance. Donegal Group is trading at a lower price-to-earnings ratio than Goosehead Insurance, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Goosehead Insurance and Donegal Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Goosehead Insurance	8.78%	-21.00%	9.43%
Donegal Group	7.38%	10.65%	2.83%

Dividends

Goosehead Insurance pays an annual dividend of $4.60 per share and has a dividend yield of 10.6%. Donegal Group pays an annual dividend of $0.77 per share and has a dividend yield of 4.2%. Goosehead Insurance pays out 335.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Donegal Group pays out 39.9% of its earnings in the form of a dividend. Donegal Group has increased its dividend for 5 consecutive years.

Summary

Goosehead Insurance beats Donegal Group on 11 of the 18 factors compared between the two stocks.

About Goosehead Insurance

Goosehead Insurance, Inc. operates as a holding company for Goosehead Financial, LLC that engages in the provision of personal lines insurance agency services in the United States. The company offers homeowner’s, automotive, dwelling property, flood, wind, earthquake, excess liability or umbrella, motorcycle, recreational vehicle, general liability, property, and life insurance products and services. As of December 31, 2023, it operated 1,415 franchise locations. The company was founded in 2003 and is headquartered in Westlake, Texas.

About Donegal Group

Donegal Group Inc., an insurance holding company, provides property and casualty insurance to businesses and individuals. It operates through three segments: Investment Function, Personal Lines of Insurance, and Commercial Lines of Insurance. The company offers private passenger automobile policies that provide protection against liability for bodily injury and property damage arising from automobile accidents, as well as protection against loss from damage to automobiles; and homeowners policies, which provide coverage for damage to residences and their contents from a range of perils, including fire, lightning, windstorm, and theft, as well as liability of the insured arising from injury to other persons or their property. It also offers commercial automobile policies that provide protection against liability for bodily injury and property damage arising from automobile accidents and protection against loss from damage to automobiles owned by the insured; commercial multi-peril policies that provide protection to businesses against combining liability and physical damage coverages; and workers’ compensation policies, which provide benefits to employees for injuries sustained during employment. The company markets its insurance products primarily to Mid-Atlantic, Midwestern, New England, Southern, and Southwestern regions through independent insurance agencies. Donegal Group Inc. was incorporated in 1986 and is based in Marietta, Pennsylvania. Donegal Group Inc. operates as a subsidiary of Donegal Mutual Insurance Company.