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Why You Should Hold Progressive (PGR) in Your Portfolio

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Progressive Corporation (PGR - Free Report) is well-poised for growth owing to higher premiums earned, lower combined ratio and solid capital position.

Growth Projections

The Zacks Consensus Estimate for 2022 earnings per share is pegged at $5.99, indicating year-over-year increase of nearly 1.1%. The expected long-term earnings growth rate is pegged at 6.7%.

Earnings Surprise History

Progressive surpassed estimates in three of the last four reported quarters and missed in one, with the average beat being 1.67%.

Estimate Revision

The Zacks Consensus Estimate for 2021 has moved 0.2% north in the past seven days, reflecting analysts’ optimism.

Zacks Rank & Price Performance

Progressive currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 19.9%, compared with the industry’s increase of 28.4%.

Style Score

The company is well poised for progress, as is evident from its favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.

Return on Equity (ROE)

The company’s ROE for the trailing 12 months is 27.5%, better than the industry average of 5.7% and reflects the company’s efficiency in utilizing shareholders’ fund.

Business Tailwinds

Riding on higher net premiums earned, investment income, fees and other revenues and service revenues, its top line has grown over the last five years (2016-2020) at a CAGR of 16.2%. Strong segmental performance is likely to drive revenues in the days ahead.

The combination of increase in average assets and increase in portfolio yields is likely to drive net investment income, an important driver of the top line, going forward despite the current low interest rate environment.

Management also remains focused on customer 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.

In the last decade (2010-2020), the insurer’s combined ratio has averaged less than 93%, which compares favorably with the industry average combined ratio of more than 100%, on the back of underwriting profitability.

The company has a reinsurance program in Property business, which is designed to reduce overall risk to the extent of coverage purchased, while protecting capital from the costs associated with catastrophes and severe storms.

The insurer has been strengthening its balance sheet. Its times interest earned, a measure to identify the company ability to service debt, of 34 is good compared with the industry’s average of 14.1, ensuring that Progressive will be able to meet current obligations without any difficulties.

Stocks to Consider

Some better-ranked stocks in the property and casualty include Fidelity National Financial, Inc. (FNF - Free Report) , Cincinnati Financial Corporation (CINF - Free Report) and First American Financial Corporation (FAF - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fidelity National’s bottom line surpassed estimates in each of the last four quarters, the average beat being 41.36%.

Cincinnati Financial surpassed earnings estimates in two of the last four quarters and missed in two, with the average surprise being 4.10%.

First American Financial’s bottom line surpassed estimates in three of the last four quarters and missed in one, the average beat being 15.86%.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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