Here's Why You Should Invest in Progressive (PGR) Stock Now
The Progressive Corporation’s PGR compelling portfolio, leadership position, strength in Vehicle and Property businesses, healthy policies in force, retention, and solid capital position make it worth retaining in one’s portfolio.
Earnings of this largest seller of motorcycle and boat policies rose 6.9% in the last five years.
Zacks Rank and Price Performance
Progressive presently flaunts a Zacks Rank #1 (Strong Buy). Shares of the company have gained 26.1% in the past six months compared with the industry’s growth of 13%.
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Return on Equity
PGR’s trailing 12-month return on equity was 17.4%, outperforming the industry average of 7.2%. Return on equity — a profitability measure — reflects how effectively a company is utilizing its shareholders.
Optimistic Growth Projections
The Zacks Consensus Estimate for Progressive’s 2023 earnings per share (EPS) is pegged at $5.44, indicating an increase of 34% on 18.2% higher revenues of $60.9 billion. The Zacks Consensus Estimate for 2024 EPS is pegged at $8.10, implying an increase of 49% on 13.2% higher revenues of $68.9 billion.
The long-term earnings growth rate is pegged at 25.8%, better than the industry average of 12.3%. We expect the 2025 bottom line to increase, seeing a three-year CAGR of 32%.
Business Tailwinds
Progressive is a market leader in commercial auto insurance and is one of the top 15 homeowner carriers based on premiums written. PGR’s premiums written increased 11% in the last 10 years and surpassed the industry average of 4%. On the strength of a compelling product portfolio, leadership position, healthy policies in force, better pricing and a solid retention ratio, PGR should continue to deliver improved premiums. We expect 2025 net written premiums to increase, witnessing a three-year CAGR of 11.5%.
Policy life expectancy (PLE), a measure of customer retention, has improved in the last few years across all business lines. Strategic initiatives to provide consumers with a distinctive new auto insurance option, along with competitive pricing, should help Progressive continue to deliver solid PLE. The insurer has been focusing on cross-selling homes with auto insurance.
PGR’s combined ratio averaged less than 93% in a decade and compared favorably with the industry average of more than 100%. Progressive is poised to deliver a better-combined ratio, banking on prudent underwriting and favorable reserve development. It aims to record a combined ratio close to 96% for 2023.
The company also earns through investing premiums received. We expect net investment income to rise 56.2% year over year in 2023.
In tandem with the industry, PGR continues to invest heavily in technology. The company estimates accelerated digitalization to improve the non-acquisition ratio in 2023.
Prudent Use of Capital
Banking on operational excellence, PGR engages in effective capital deployment. This, in turn, enhances shareholders’ value. Progressive has been paying dividends uninterruptedly since 1971, yielding 0.3%, and has a 25-million share buyback program under its authorization.
Stocks to Consider
Some other top-ranked stocks from the same industry are Arch Capital Group ACGL, CNA Financial Corporation CNA and HCI Group, Inc. HCI. These three companies currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Arch Capital’s 2023 and 2024 earnings indicates year-over-year increases of 58.1% and 1%, respectively. ACGL delivered a four-quarter average earnings surprise of 35.2%. The consensus estimate for 2023 and 2024 earnings has moved up 0.4% and 0.1%, respectively, in the past week.
CNA Financial delivered a four-quarter average earnings surprise of 9.2%. The Zacks Consensus Estimate for CNA’s 2023 and 2024 earnings indicates year-over-year increases of 14.8% and 7.4%, respectively. The consensus estimate for 2023 and 2024 earnings has moved up 2.8% and 5.3%, respectively, in the past 30 days.
HCI Group delivered a four-quarter average earnings surprise of 519.6%. The Zacks Consensus Estimate for HCI’s 2023 and 2024 earnings indicates year-over-year increases of 194.9% and 51.4%, respectively. The Zacks Consensus Estimate for 2023 and 2024 revenues indicates year-over-year increases of 5.5% and 19.5%, respectively.
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The Progressive Corporation (PGR) : Free Stock Analysis Report
CNA Financial Corporation (CNA) : Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
HCI Group, Inc. (HCI) : Free Stock Analysis Report
