Progressive Corporation PGR is currently riding on strong premium earned, healthy policies in force and retention ratio as well as compelling product portfolio.
The stock has a VGM Score of B. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.
Shares of Progressive have gained 4.8% year to date against the industry’s decline of 24.8%. Improving operating revenues, continued premium growth and robust capital position should drive shares higher in the future.
Progressive’s return on equity was 26.8% in the trailing 12-month period, higher than the industry average of 6.5%. Return on equity is a profitability measure that identifies a company’s efficiency in utilizing its shareholders’ funds.
The company has a decent earnings surprise history. It surpassed estimates in three of the trailing four quarters, the beat being 15.58%, on average.
Estimates for Progressive have been revised upward over the past 30 days, reflecting analysts’ confidence in the stock. The Zacks Consensus Estimate for 2020 earnings per share has moved up 7% in the said time frame.
Factors Driving Progressive
The company's top line has been increasing over the years owing to higher net premiums earned, investment income, fees and other revenues and service revenues. The metric witnessed CAGR of 16.9% over the last four years (2015-2019). Higher premiums and strong segmental performance are likely to drive revenues in the days ahead.
Further, net investment income, an important driver of the top line, has grown at a two-year CAGR of 37.4%. Though the rate environment remains very low, a combination of increase in average assets and increase in portfolio yields are likely to drive the metric going forward.
Management also remains focused on customer retention. The company intends to provide distinctive new auto insurance options to retain customers. Policy life expectancy (PLE), a measure for customer retention, has improved over the last few years. The company remains focused on improving retention through increased rate stability and making investments to improve customer experience. It is expected that competitive pricing and new product offerings will enhance PLE in the upcoming quarters. The company is also cross-selling auto policies and Progressive Home Advantage.
It has a Zacks Rank #2 (Buy) and an impressive Value Score of A. Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best opportunities in the value investing space.
Other Stocks to Consider
Investors interested in the same industry can look at other top-ranked stocks like National General Holdings Corp. NGHC, The Allstate Corporation ALL and Palomar Holdings Inc. PLMR. While National General Holdings carries a Zacks Rank #1, Allstate and Palomar carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
National General’s earnings beat estimates in two of the last four quarters and missed in the other two, the average positive surprise being 5.68%.
Allstate surpassed estimates in each of the last four quarters, with the average positive surprise being 18.45%.
Palomar surpassed estimates in two of the last four quarters, with the average positive surprise being 10.93%.
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