Here's Why Progressive (PGR) Stock is Investors' Favorite Now
Shares of The Progressive Corporation PGR have rallied 23.2% in a year, outperforming 11.7%, 12.3% and 21.9% growth of the industry, the Finance sector and the Zacks S&P 500 composite, respectively. With a market capitalization of $95.2 billion, the average volume of shares traded in the last three months was 2.4 million.
A compelling portfolio, leadership position, strength in Vehicle and Property businesses, healthy policies in force, retention and solid capital position continue to drive this Zacks Rank #2 (Buy) insurer. The Zacks Consensus Estimate for 2024 earnings has moved north by 2.9% in the past 30 days, reflecting analysts’ optimism.
PGR’s trailing 12-month return on equity is 17.4%, ahead of the industry average of 7.2%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders. It has a VGM Score of A.
Growth Drivers
The Zacks Consensus Estimate for Progressive’s 2024 earnings is pegged at $8.28 per share, indicating an increase of 51.7% on 13.7% higher revenues of $69.6 billion.
The long-term earnings growth rate is currently pegged at 26.6%, better than the industry average of 12.3%. We expect the 2025 bottom line to increase at a three-year CAGR of 30.1%. Earnings of this largest seller of motorcycle and boat policies rose 6.9% in the last five years. It has a Growth Score of A.
Progressive is poised to deliver improved premiums, banking on the strength of a compelling product portfolio, leadership position, healthy policies in force, better pricing and a solid retention ratio. PGR’s premiums written increased 11% in the last 10 years and surpassed the industry average of 4%. We estimate 2025 net written premiums to increase at a three-year CAGR of 9.6%.
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 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%. Prudent underwriting and favorable reserve development should support Progressive in delivering a better combined ratio.
The insurance industry Is witnessing accelerated digitalization. In tandem with the industry trend, PGR continues to invest in technology.
Banking on operational excellence, PGR engages in capital payout. Progressive has been paying dividends uninterruptedly since 1971, yielding 0.3%, and has a 25 million share buyback program under its authorization. Notably, its free cash flow conversion has remained more than 100% in the last many quarters, reflecting its solid earnings.
It has a Value Score of B. This style score helps find the most attractive value stocks. Back-tested results have shown that stocks with a Value Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 offer better returns.
Other Stocks to Consider
Some other top-ranked stocks from the same space are CNA Financial Corporation CNA, Chubb Limited CB and Berkshire Hathaway (BRK.B), each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
CNA Financial delivered a trailing four-quarter average earnings surprise of 9.24%. The stock has gained 1.2% in a year.
The Zacks Consensus Estimate for CNA’s 2024 earnings indicates an increase of 7.4% from the 2023 estimated figure. The expected long-term earnings growth rate is 5%. The consensus estimate for 2024 earnings has moved up 1.5% in the past 30 days.
Chubb’s earnings surpassed estimates in three of the last four quarters while missing in one, the average being 6.51%. The stock has gained 1.9% in a year.
The Zacks Consensus Estimate for Chubb’s 2024 earnings implies a rise of 7.4% from the 2023 estimated figure. The expected long-term earnings growth rate is 10%. The consensus estimate for CB’s 2024 earnings has moved up 0.4% in the past 60 days.
Berkshire delivered a trailing four-quarter average earnings surprise of 0.20%. In a year, the stock has gained 15.9%.
The Zacks Consensus Estimate for BRK.B’s 2024 earnings indicates an increase of 11.1% from the 2023 estimated figure. The expected long-term earnings growth rate is 7%. The consensus estimate for BRK.B’s 2024 earnings has moved up 2.8% in the past 30 days.
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