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Here's Why Hold is an Apt Strategy for Travelers (TRV) Stock
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The Travelers Companies, Inc. (TRV - Free Report) is poised for growth on a compelling portfolio that ensures strong renewal rate change, solid retention, an increase in new business and higher average levels of invested assets. A solid balance sheet and favorable growth estimates make Travelers stock worth retaining in one’s portfolio.
The company has a solid track record of beating earnings estimates in the last four quarters, with the average being 32.40%.
Zacks Rank & Price Performance
Travelers currently carries a Zacks Rank #3 (Hold). Year to date, the stock has gained 13.4%, outperforming the industry’s increase of 8.5%.
Image Source: Zacks Investment Research
Growth Projections
The Zacks Consensus Estimate for 2021 earnings is pegged at $12.52, indicating a 19.5% increase from the year-ago reported figure on 7.5% higher revenues of $34.4 billion. The consensus estimate for Travelers' 2022 earnings is pegged at $12.64, indicating an increase of 2.2% from the year-ago reported figure on 4.2% higher revenues of $35.8 billion.
The long-term earnings growth rate is currently pegged at 6.5%.
Return on Equity (ROE)
The company’s ROE for the trailing 12 months is 12.2%, comparing favorably with the industry’s 5.6%, reflecting its efficiency in utilizing shareholders’ fund. Travelers has been increasing core return on equity over the last three years and aims to generate mid-teens core ROE over time.
Style Score
Travelers has an impressive VGM Score of A. This style score rates stocks on their combined weighted styles, helping to identify those with the most attractive value, best growth, and momentum.
Business Tailwinds
Travelers is one of the leading writers of auto and homeowners’ insurance plus commercial U.S. property-casualty insurance. Banking on competitive advantage, the property and casualty insurer consistently exhibits operational excellence, makes strategic investments and returns capital to shareholders.
A compelling portfolio of providing insurance coverages across nine lines of business should continue to help Travelers maintain high levels of retention, improve pricing and increase new business while achieving a positive renewal premium change.
The insurer boasts a high-quality investment portfolio, generating solid net investment income. Travelers expects net investment income from non-fixed income portfolio to be $420 million to $430 million quarterly in 2022.
Focus on implementing pricing and other strategic actions should continue to increase returns and improve profitability.
Though being a property and casualty insurer, Travelers is exposed to catastrophe loss. An active catastrophe reinsurance program helps in absorbing losses.
Solid Dividend History
The company has been hiking dividends for the last 16 years. Its dividend increased at a five-year CAGR of 7.5%. Its current dividend yield of 2.2% is better than the industry average of 0.4%.
Strong Capital Position
Travelers maintains a conservative balance sheet among its peers with statutory capital and surplus of $23 billion at third-quarter 2021 end. The debt-to-capital ratio (excluding after-tax net unrealized investment gains included in shareholders’ equity) of 22 remains within the target range of 15-25. The insurer has been consistently increasing its book value for the past nine years.
Travelers scores strongly with credit rating agencies.
Stocks to Consider
Some better-ranked stocks from the same space include First American Financial (FAF - Free Report) , Fidelity National Financial (FNF - Free Report) and Cincinnati FinancialCorporation (CINF - Free Report) .
First American sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for 2021 earnings reflects 22% year over year increase. First American delivered a four-quarter average earnings surprise of 29.19%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for 2021 and 2022 earnings of Fidelity National, sporting a Zacks Rank #1, has moved up 6.1% and 4.6% in the past seven days. Fidelity National delivered a four-quarter average earnings surprise of 38.18%.
Cincinnati Financial carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2021 earnings reflects 64% year over year increase. Cincinnati Financial delivered a four-quarter average earnings surprise of 40.05%.
Shares of First American Financial, Fidelity National and Cincinnati Financial have gained 57.7%, 38.1% and 43.2%, respectively in a year.
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Here's Why Hold is an Apt Strategy for Travelers (TRV) Stock
The Travelers Companies, Inc. (TRV - Free Report) is poised for growth on a compelling portfolio that ensures strong renewal rate change, solid retention, an increase in new business and higher average levels of invested assets. A solid balance sheet and favorable growth estimates make Travelers stock worth retaining in one’s portfolio.
The company has a solid track record of beating earnings estimates in the last four quarters, with the average being 32.40%.
Zacks Rank & Price Performance
Travelers currently carries a Zacks Rank #3 (Hold). Year to date, the stock has gained 13.4%, outperforming the industry’s increase of 8.5%.
Growth Projections
The Zacks Consensus Estimate for 2021 earnings is pegged at $12.52, indicating a 19.5% increase from the year-ago reported figure on 7.5% higher revenues of $34.4 billion. The consensus estimate for Travelers' 2022 earnings is pegged at $12.64, indicating an increase of 2.2% from the year-ago reported figure on 4.2% higher revenues of $35.8 billion.
The long-term earnings growth rate is currently pegged at 6.5%.
Return on Equity (ROE)
The company’s ROE for the trailing 12 months is 12.2%, comparing favorably with the industry’s 5.6%, reflecting its efficiency in utilizing shareholders’ fund. Travelers has been increasing core return on equity over the last three years and aims to generate mid-teens core ROE over time.
Style Score
Travelers has an impressive VGM Score of A. This style score rates stocks on their combined weighted styles, helping to identify those with the most attractive value, best growth, and momentum.
Business Tailwinds
Travelers is one of the leading writers of auto and homeowners’ insurance plus commercial U.S. property-casualty insurance. Banking on competitive advantage, the property and casualty insurer consistently exhibits operational excellence, makes strategic investments and returns capital to shareholders.
A compelling portfolio of providing insurance coverages across nine lines of business should continue to help Travelers maintain high levels of retention, improve pricing and increase new business while achieving a positive renewal premium change.
The insurer boasts a high-quality investment portfolio, generating solid net investment income. Travelers expects net investment income from non-fixed income portfolio to be $420 million to $430 million quarterly in 2022.
Focus on implementing pricing and other strategic actions should continue to increase returns and improve profitability.
Though being a property and casualty insurer, Travelers is exposed to catastrophe loss. An active catastrophe reinsurance program helps in absorbing losses.
Solid Dividend History
The company has been hiking dividends for the last 16 years. Its dividend increased at a five-year CAGR of 7.5%. Its current dividend yield of 2.2% is better than the industry average of 0.4%.
Strong Capital Position
Travelers maintains a conservative balance sheet among its peers with statutory capital and surplus of $23 billion at third-quarter 2021 end. The debt-to-capital ratio (excluding after-tax net unrealized investment gains included in shareholders’ equity) of 22 remains within the target range of 15-25. The insurer has been consistently increasing its book value for the past nine years.
Travelers scores strongly with credit rating agencies.
Stocks to Consider
Some better-ranked stocks from the same space include First American Financial (FAF - Free Report) , Fidelity National Financial (FNF - Free Report) and Cincinnati Financial Corporation (CINF - Free Report) .
First American sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for 2021 earnings reflects 22% year over year increase. First American delivered a four-quarter average earnings surprise of 29.19%. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for 2021 and 2022 earnings of Fidelity National, sporting a Zacks Rank #1, has moved up 6.1% and 4.6% in the past seven days. Fidelity National delivered a four-quarter average earnings surprise of 38.18%.
Cincinnati Financial carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for 2021 earnings reflects 64% year over year increase. Cincinnati Financial delivered a four-quarter average earnings surprise of 40.05%.
Shares of First American Financial, Fidelity National and Cincinnati Financial have gained 57.7%, 38.1% and 43.2%, respectively in a year.