Waterdrop (NYSE:WDH – Get Free Report) and Palomar (NASDAQ:PLMR – Get Free Report) are both finance companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, institutional ownership, earnings, valuation, profitability, analyst recommendations and risk.
Profitability
This table compares Waterdrop and Palomar’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Waterdrop | 10.69% | 10.47% | 7.40% |
| Palomar | 17.60% | 25.42% | 6.90% |
Risk & Volatility
Waterdrop has a beta of -0.17, suggesting that its stock price is 117% less volatile than the S&P 500. Comparatively, Palomar has a beta of 0.28, suggesting that its stock price is 72% less volatile than the S&P 500.
Analyst Recommendations
This is a breakdown of current ratings and recommmendations for Waterdrop and Palomar, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Waterdrop | 1 | 0 | 0 | 0 | 1.00 |
| Palomar | 0 | 1 | 5 | 0 | 2.83 |
Palomar has a consensus target price of $163.00, suggesting a potential upside of 4.71%. Given Palomar’s stronger consensus rating and higher possible upside, analysts plainly believe Palomar is more favorable than Waterdrop.
Dividends
Waterdrop pays an annual dividend of $0.04 per share and has a dividend yield of 4.0%. Palomar pays an annual dividend of $1.80 per share and has a dividend yield of 1.2%. Waterdrop pays out 19.0% of its earnings in the form of a dividend. Palomar pays out 22.5% 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. Waterdrop is clearly the better dividend stock, given its higher yield and lower payout ratio.
Institutional and Insider Ownership
2.0% of Waterdrop shares are owned by institutional investors. Comparatively, 90.2% of Palomar shares are owned by institutional investors. 24.6% of Waterdrop shares are owned by company insiders. Comparatively, 3.7% of Palomar shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.
Valuation & Earnings
This table compares Waterdrop and Palomar”s top-line revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Waterdrop | $5.08 billion | 0.07 | $81.36 million | $0.21 | 4.79 |
| Palomar | $875.97 million | 4.68 | $197.07 million | $7.99 | 19.48 |
Palomar has lower revenue, but higher earnings than Waterdrop. Waterdrop is trading at a lower price-to-earnings ratio than Palomar, indicating that it is currently the more affordable of the two stocks.
Summary
Palomar beats Waterdrop on 11 of the 16 factors compared between the two stocks.
About Waterdrop
Waterdrop Inc., through its subsidiaries, provides online insurance brokerage services to match and connect users with related insurance products underwritten by insurance companies in the People's Republic of China. The company offers short-term health and long-term health and life insurance products and services. It also operates a medical crowdfunding platform. Waterdrop Inc. was founded in 2016 and is headquartered in Beijing, the People's Republic of China.
About Palomar
Palomar Holdings, Inc., a specialty insurance company, provides property and casualty insurance to residential and businesses in the United States. The company offers personal and commercial specialty property insurance products, including residential and commercial earthquake, fronting, commercial all risk, specialty homeowners, inland marine, Hawaii hurricane, and residential flood, as well as other products, such as assumed reinsurance. It markets and distributes its products through retail agents, wholesale brokers, program administrators, and carrier partnerships. The company was formerly known as GC Palomar Holdings and changed its name to Palomar Holdings, Inc. The company was incorporated in 2013 and is headquartered in La Jolla, California.
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