Coverage of the shares of this insurance company was just initiated at Credit Suisse with an ‘Outperform’ rating.
The Progressive Corporation (PGR)
From Dow Theory Forecasts
Property & casualty insurer The Progressive Corporation’s (PGR) Overall score of 96 is driven by scores of 98 for Momentum and Earnings Estimates, as well as an 81 for Quality.
In the wake of stronger-than-expected June-quarter results, profit targets for the September and December quarters have increased, which explains Quadrix scores of 92 or higher for estimate revisions in both quarters. Progressive also scores above 70 for three-year dividend growth and five-year growth in equity and net income.
We credit much of Progressive’s sales growth of 17% over the last year and 13% annualized over the last three years to a combination of acquisitions and organic gains in market share. Aggressive and creative marketing efforts have helped boost the brand’s reach in the discount segment of the insurance market and generate growth higher than the industry average. At the same time, Progressive enjoys superior underwriting results, suggesting the company hasn’t resorted to risky price competition.
Progressive trades at a very slight discount to the industry median based on estimated current-year P/E ratio, trailing price/sales, and several other metrics. Given the stock’s solid growth and improving market position, a premium valuation seems appropriate. Progressive is a Buy and a Long-Term Buy.
Richard Moroney, CFA, Dow Theory Forecasts, www.dowtheory.com, 800-233-5922, July 30, 2018