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Results: Selective Insurance Group, Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates

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·4 min read
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A week ago, Selective Insurance Group, Inc. (NASDAQ:SIGI) came out with a strong set of yearly numbers that could potentially lead to a re-rate of the stock. The company beat both earnings and revenue forecasts, with revenue of US$2.9b, some 2.1% above estimates, and statutory earnings per share (EPS) coming in at US$4.09, 32% ahead of expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Selective Insurance Group

earnings-and-revenue-growth
earnings-and-revenue-growth

Following the latest results, Selective Insurance Group's six analysts are now forecasting revenues of US$3.09b in 2021. This would be a modest 5.7% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to accumulate 6.0% to US$4.33. Before this earnings report, the analysts had been forecasting revenues of US$3.08b and earnings per share (EPS) of US$4.23 in 2021. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

The consensus price target was unchanged at US$69.40, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Selective Insurance Group at US$72.00 per share, while the most bearish prices it at US$67.00. This is a very narrow spread of estimates, implying either that Selective Insurance Group is an easy company to value, or - more likely - the analysts are relying heavily on some key assumptions.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Selective Insurance Group's past performance and to peers in the same industry. We can infer from the latest estimates that forecasts expect a continuation of Selective Insurance Group'shistorical trends, as next year's 5.7% revenue growth is roughly in line with 6.3% annual revenue growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the industry are forecast to see their revenues grow 4.9% per year. It's clear that while Selective Insurance Group's revenue growth is expected to continue on its current trajectory, it's only expected to grow in line with the industry itself.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Selective Insurance Group's earnings potential next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Selective Insurance Group analysts - going out to 2022, and you can see them free on our platform here.

Don't forget that there may still be risks. For instance, we've identified 1 warning sign for Selective Insurance Group that you should be aware of.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.