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Here's Why You Should Add Progressive (PGR) to Your Portfolio

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Estimates for The Progressive Corporation (PGR - Free Report) have been revised upward over the past seven days, reflecting analysts’ confidence in the stock before earnings. The Zacks Consensus Estimate for 2018 earnings moved 1.3% north to $4.69 in the said timeframe.

This leading auto insurer sports a Zacks Rank #1 (Strong Buy) and has an impressive VGM Score of A. Back-tested results have shown that stocks with a favorable VGM Score of A or B coupled with a solid Zacks Rank #1 or 2 (Buy) offer the best investment opportunity.

Shares of the company have surged 45.5% in a year’s time, outperforming the industry’s 15.9% increase and the Zacks S&P 500 Composite's increase of 13.3%.

Progressive’s return on equity stands at 21.8%, much above the industry average of 5.8%. Return on equity underscores profitability, identifying how efficiently the company is utilizing shareholders’ money.  

Let’s focus on the factors that make Progressive an attractive pick.

Improving Top Line: Progressive has recorded increase in revenues over the past several years, attributable to higher net premiums earned as well as investment income. The company’s top line witnessed a five-year CAGR of 8.1%.

Compelling product portfolio, competitive rates and continued solid performance at its Vehicle and Property businesses should continue to drive premiums, which, in turn, will aid the top line.

Growth Initiatives: Progressive has been pursuing strategic initiatives that should continue to drive growth. The company identified that growth area for personal auto continues to be in Internet-produced business and thus has intensified focus on the same.

It has also made efforts to bundle auto product with property insurance and Robinsons (bundled home and auto) has been showing positive results. The company has increased stake in ARX Holding Corp. to reach the still under-penetrated market segment of bundled customers.

Effective Capital Deployment: Progressive Group has a strong capital management policy in place that enhances its shareholder value. While the company pays special dividend, its regular dividend has witnessed five -year CAGR of 41%. Its dividend yield of 1.6% betters the industry average of 0.4%. The company also has a 25 million share buyback program. These endeavors make the stock an attractive pick for yield-seeking investors.

Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $4.69, indicating year-over-year surge of 78.3% on 19.5% higher revenues of $32 billion. Progressive has an expected long-term earnings per share growth rate of 7.3%.

The stock has an impressive Growth Score of A

Attractive Valuation: Shares of Progressive Corporation are trading at a price-to-book multiple of 3.98, lower than the Zack S&P Composite average of 4.05. Price-to-book value is the best ratio for valuing life insurers because of large variations in their earnings from one quarter to the next. This ratio essentially measures a life insurer’s current market value relative to what it would be worth if it chooses to shut down. Underpriced shares with solid fundamentals are lucrative bets.

The stock also has an impressive Value Score Value Score of B. Value Score helps identify the most attractive value stocks.

Other Stocks to Consider

Investors interested in property and casualty industry can also check out a few other top-ranked stocks like Kingstone Companies, Inc (KINS - Free Report) , Markel Corporation (MKL - Free Report) and RenaissanceRe Holdings Ltd. (RNR - Free Report) , each carrying a Zacks Rank of 1. Youcan see the complete list of today’s Zacks #1 Rank stocks here.

Kingstone Companies underwrites property and casualty insurance products to small businesses and individuals in New York. It delivered an average four-quarter positive of 0.17%.

Markel markets and underwrites specialty insurance products in the United States, the United Kingdom, Canada, and internationally. It delivered an average four-quarter positive of 34.72%.

RenaissanceRe Holdings provides reinsurance and insurance coverages in the United States and internationally. It delivered an average four-quarter positive of 31.16%.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

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