Critical Contrast: HCI Group (NYSE:HCI) and Tiptree (NASDAQ:TIPT)

Tiptree (NASDAQ:TIPT) and HCI Group (NYSE:HCI) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, dividends, profitability, earnings, analyst recommendations, institutional ownership and valuation.

Volatility and Risk

Tiptree has a beta of 1.2, indicating that its stock price is 20% more volatile than the S&P 500. Comparatively, HCI Group has a beta of 1.12, indicating that its stock price is 12% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and price targets for Tiptree and HCI Group, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Tiptree	0	0	0	0	N/A
HCI Group	0	0	4	0	3.00

HCI Group has a consensus target price of $125.33, suggesting a potential upside of 8.49%. Given HCI Group’s higher probable upside, analysts plainly believe HCI Group is more favorable than Tiptree.

Institutional and Insider Ownership

37.8% of Tiptree shares are held by institutional investors. Comparatively, 87.0% of HCI Group shares are held by institutional investors. 31.8% of Tiptree shares are held by company insiders. Comparatively, 25.3% of HCI Group shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Dividends

Tiptree pays an annual dividend of $0.24 per share and has a dividend yield of 1.4%. HCI Group pays an annual dividend of $1.60 per share and has a dividend yield of 1.4%. Tiptree pays out 75.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. HCI Group pays out 21.2% of its earnings in the form of a dividend. Tiptree has raised its dividend for 2 consecutive years. Tiptree is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Tiptree 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
Tiptree	$1.65 billion	0.38	$13.95 million	$0.32	53.03
HCI Group	$550.67 million	2.09	$79.03 million	$7.56	15.28

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Tiptree	0.85%	11.10%	1.30%
HCI Group	14.35%	36.40%	4.64%

Summary

HCI Group beats Tiptree on 10 of the 16 factors compared between the two stocks.

About Tiptree

Tiptree Inc., through its subsidiaries, provides specialty insurance products and related services primarily in the United States. It operates through two segments: Insurance and Mortgage. The company offers niche; commercial lines insurance products, including professional liability, general liability, contractual liability protection, property and other short-tail, and alternative risks insurance products; and personal lines insurance products, such as credit protection surrounding loan payments. It also provides auto and consumer warranty programs, including mobile devices, consumer electronics, appliances, furniture; and vehicle service contracts, GAP, and ancillary products; as well as premium or warranty contract financing services, lead generation support, and business process outsourcing services. In addition, the company offers mortgage loans for institutional investors; asset management services; and maritime shipping and asset management services, as well as invests in shares. It markets its products through a network of independent insurance agents, consumer finance companies, online retailers, auto dealers, and regional big box retailers. The company was formerly known as Tiptree Financial Inc. and changed its name to Tiptree Inc. in December 2016. Tiptree Inc. was founded in 1978 and is headquartered in Greenwich, Connecticut.

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.