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Is Donegal Group (DGICA) Stock Undervalued Right Now?

Zacks Equity Research
·3 min read

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

Donegal Group (DGICA) is a stock many investors are watching right now. DGICA is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 13.64, which compares to its industry's average of 27.30. Over the last 12 months, DGICA's Forward P/E has been as high as 22.22 and as low as 10.55, with a median of 15.78.

We should also highlight that DGICA has a P/B ratio of 0.96. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. DGICA's current P/B looks attractive when compared to its industry's average P/B of 1.42. DGICA's P/B has been as high as 1.01 and as low as 0.74, with a median of 0.94, over the past year.

Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. DGICA has a P/S ratio of 0.53. This compares to its industry's average P/S of 0.73.

Finally, our model also underscores that DGICA has a P/CF ratio of 6.67. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. DGICA's P/CF compares to its industry's average P/CF of 15.10. Over the past year, DGICA's P/CF has been as high as 23.32 and as low as 5.16, with a median of 14.56.

These are just a handful of the figures considered in Donegal Group's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that DGICA is an impressive value stock right now.


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Zacks Investment Research