Alleghany Corporation Y is poised for long-term growth on the back of an improving top line, strategic buyouts and prudent capital deployment. The stock sports a Zacks Rank #1 (Strong Buy).
Estimates for Alleghany have been revised upward over the past 30 days, reflecting analysts’ confidence in the stock. The Zacks Consensus Estimate for 2019 earnings per share has moved 5.6% north to $38.00 and 6.8% for 2020 to $41.50.
Alleghany has a decent surprise history having delivered positive surprises in three of the last four quarters, reflecting operational excellence.
Alleghany has been witnessing top line improvement over the past few years, driven higher gross premium written. Continued strong underwriting performances by TransRe, RSUI and CapSpecialty should help the company retain the growth momentum.
Alleghany considers strategic buyouts a prudent approach to ramp up growth. The past buyouts of RSUI and CapSpecialty – responsible for insurance operations – were a testimony to the company’s long-term growth strategy.
A strong balance sheet with modest leverage helps the company pursue strategic growth opportunities. A solid capital position also supports share buybacks. The company had $191 million remaining under its authorization as of Mar 31, 2019. The company paid a special dividend of $10 in March 2018. Also, the company targets compound book value per share growth of 7-10% over a long term.
Shares of Alleghany have gained 10% year to date, outperforming the industry's rise of 2.6%. We expect solid operational performance to drive shares going ahead.
Its valuation looks attractive at the current level as the price-to-book multiple of 1.2 is lower than the industry average of 1.4. Price to book value ratio is the best multiple for valuing life insurers because of significant variations in their earnings from one quarter to the next. Undervalued stocks with solid fundamentals are best investment bets.
The Zacks Consensus Estimate for 2019 earnings per share is pegged at $38.00, indicating 135.6% year-over-year surge. For 2020, the consensus mark for earnings is pegged at $41.50, indicating 9.2% year-over-year growth.
Other Stocks to Consider
Some other top-ranked property and casualty industry players include Argo Group International Holdings, Ltd. ARGO, Hallmark Financial Services, Inc. HALL and Kinsale Capital Group, Inc. KNSL. Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here..
Argo Group underwrites specialty insurance and reinsurance products in the property and casualty markets. The company delivered four-quarter average positive surprise of 224.07%.
Hallmark Financial underwrites, markets, distributes and services property/casualty insurance products to businesses and individuals in the United States. The company delivered four-quarter average positive surprise of 98.45%.
Kinsale Capital provides casualty and property insurance products in the United States. The company delivered four-quarter average positive surprise of 7.55%.
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