Critical Review: HCI Group (NYSE:HCI) and Universal Insurance (NYSE:UVE)

Universal Insurance (NYSE:UVE) and HCI Group (NYSE:HCI) are both small-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their dividends, earnings, valuation, risk, profitability, institutional ownership and analyst recommendations.

Valuation & Earnings

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Universal Insurance	$1.51 billion	0.41	$66.82 million	$2.46	8.83
HCI Group	$706.97 million	1.76	$79.03 million	$11.97	9.92

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

Institutional & Insider Ownership

66.6% of Universal Insurance shares are held by institutional investors. Comparatively, 87.0% of HCI Group shares are held by institutional investors. 17.5% of Universal Insurance shares are held by insiders. Comparatively, 21.0% of HCI Group shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Universal Insurance pays an annual dividend of $0.64 per share and has a dividend yield of 2.9%. HCI Group pays an annual dividend of $1.60 per share and has a dividend yield of 1.3%. Universal Insurance pays out 26.0% of its earnings in the form of a dividend. HCI Group pays out 13.4% 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.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Universal Insurance and HCI Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Universal Insurance	0	0	1	0	3.00
HCI Group	0	1	4	0	2.80

Universal Insurance presently has a consensus price target of $25.00, suggesting a potential upside of 15.10%. HCI Group has a consensus price target of $140.00, suggesting a potential upside of 17.94%. Given HCI Group’s higher probable upside, analysts plainly believe HCI Group is more favorable than Universal Insurance.

Volatility & Risk

Universal Insurance has a beta of 0.9, suggesting that its stock price is 10% less volatile than the S&P 500. Comparatively, HCI Group has a beta of 1.12, suggesting that its stock price is 12% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Universal Insurance	4.82%	15.43%	2.37%
HCI Group	21.63%	44.01%	8.33%

Summary

HCI Group beats Universal Insurance on 13 of the 16 factors compared between the two stocks.

About Universal Insurance

Universal Insurance Holdings, Inc., together with its subsidiaries, operates as an integrated insurance holding company in the United States. It develops, markets, and underwrites insurance products for personal residential insurance, such as homeowners, renters/tenants, condo unit owners, and dwelling/fire; and offers allied lines, coverage for other structures, and personal property, liability, and personal articles coverages. The company also advises on actuarial issues, oversees distribution, administers claims payments, performs policy administration and underwriting, and assists with reinsurance negotiations; places and manages reinsurance programs for the insurance entities; and operates Clovered.com, a digital agency for various carrier partners and utilization of digital applications for adjusting claims. It offers its products through a network of independent agents, as well as direct-to-consumer online solutions, including digital insurance agency. The company was formerly known as Universal Heights, Inc. and changed its name to Universal Insurance Holdings, Inc. in January 2001. Universal Insurance Holdings, Inc. was incorporated in 1990 and is headquartered in Fort Lauderdale, Florida.

About HCI Group

HCI Group, Inc., together with its subsidiaries, engages in the property and casualty insurance, insurance management, reinsurance, real estate, and information technology businesses in Florida. It provides residential insurance products, such as homeowners, fire, flood, and wind-only insurance to homeowners, condominium owners, and tenants for properties, as well as offers reinsurance programs. The company also owns and operates waterfront properties and retail shopping centers, and an office building, as well as commercial properties for investment purposes. In addition, it designs and develops web-based applications and products for mobile devices, including SAMS, an online policy administration platform; Harmony, a policy administration platform; ClaimColony, an end-to-end claims management platform; and AtlasViewer, a mapping and data visualization platform. 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.