Critical Review: Berkshire Hathaway (BRK.A) versus Donegal Group (DGICA)

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Berkshire Hathaway (NYSE:BRK.A) and Donegal Group (NASDAQ:DGICA) are both finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, institutional ownership, earnings, risk, dividends and valuation.

Dividends

Donegal Group pays an annual dividend of $0.58 per share and has a dividend yield of 3.9%. Berkshire Hathaway does not pay a dividend. Donegal Group pays out -58.0% of its earnings in the form of a dividend. Donegal Group has increased its dividend for 3 consecutive years.

Valuation and Earnings

This table compares Berkshire Hathaway and Donegal Group’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Berkshire Hathaway $247.84 billion 2.01 $4.02 billion $15,075.48 20.10
Donegal Group $771.83 million 0.54 -$32.76 million ($1.00) -14.74

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

Volatility & Risk

Berkshire Hathaway has a beta of 0.81, suggesting that its share price is 19% less volatile than the S&P 500. Comparatively, Donegal Group has a beta of 0.36, suggesting that its share price is 64% less volatile than the S&P 500.

Insider and Institutional Ownership

18.8% of Berkshire Hathaway shares are owned by institutional investors. Comparatively, 31.1% of Donegal Group shares are owned by institutional investors. 4.2% of Berkshire Hathaway shares are owned by company insiders. Comparatively, 9.8% of Donegal Group shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Berkshire Hathaway and Donegal Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Berkshire Hathaway 0 0 1 0 3.00
Donegal Group 0 1 0 0 2.00

Berkshire Hathaway currently has a consensus target price of $378,000.00, indicating a potential upside of 24.75%. Given Berkshire Hathaway’s stronger consensus rating and higher probable upside, analysts clearly believe Berkshire Hathaway is more favorable than Donegal Group.

Profitability

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

Net Margins Return on Equity Return on Assets
Berkshire Hathaway 10.73% 6.83% 3.46%
Donegal Group 1.06% -0.58% -0.13%

Summary

Berkshire Hathaway beats Donegal Group on 12 of the 17 factors compared between the two stocks.

Berkshire Hathaway Company Profile

Berkshire Hathaway Inc., through its subsidiaries engages in insurance, freight rail transportation, and utility businesses. It provides property and casualty insurance and reinsurance, as well as life, accident, and health reinsurance; and operates railroad systems in North America. The company also generates, transmits, stores, and distributes electricity from natural gas, coal, wind, solar, hydro, nuclear, and geothermal sources; operates natural gas distribution and storage facilities, interstate pipelines, and compressor and meter stations; and holds interest in coal mining assets. In addition, it offers real estate brokerage services; and leases transportation equipment and furniture. Further, the company manufactures boxed chocolates and other confectionery products; specialty chemicals, metal cutting tools, and components for aerospace and power generation applications; flooring, insulation, roofing and engineered, building and engineered components, paints and coatings, and bricks and masonry products, as well as offers homebuilding and manufactured housing finance; recreational vehicles, apparel products, jewelry, and custom picture framing products; and alkaline batteries. Additionally, it manufactures castings, forgings, fasteners/fastener systems, and aerostructures; titanium, steel, and nickel; and seamless pipes and fittings. The company distributes newspapers, televisions, and information; franchises and services quick service restaurants; distributes electronic components; and offers logistics services, grocery and foodservice distribution services, professional aviation training programs, and fractional aircraft ownership programs. In addition, it retails automobiles; furniture, bedding, and accessories; household appliances, electronics, and computers; jewelry, watches, crystal, china, stemware, flatware, gifts, and collectibles; kitchenware; and motorcycle accessories. The company was founded in 1889 and is headquartered in Omaha, Nebraska.

Donegal Group Company Profile

Donegal Group Inc., an insurance holding company, provides personal and commercial lines of property and casualty insurance to businesses and individuals in the Mid-Atlantic, Midwestern, New England, and southern states. It operates through four segments: Investment Function, Personal Lines of Insurance, Commercial Lines of Insurance, and Investment in DFSC. 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. It also offers homeowners policies, which provide coverage for damage to residences and their contents from a range of perils, including fire, lightning, windstorm, and theft; and liability of the insured arising from injury to other persons or their property. In addition, the company 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 various perils, primarily 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 through a network of approximately 2,400 independent insurance agencies. Donegal Group Inc. was founded in 1986 and is headquartered in Marietta, Pennsylvania. Donegal Group Inc. is a subsidiary of Donegal Mutual Insurance Company.

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