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Why is it a Prudent Move to Invest in Argo Group (ARGO) Stock?

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Argo Group International Holdings’ (ARGO - Free Report) highly profitable business, growth efforts, expense initiative program, investment in technology and a solid capital position along with favorable growth make it a stock worth adding to one’s portfolio.

Argo Group’s has a solid earnings surprise history, having surpassed estimates in the last five quarters.

This insurer has an impressive VGM Score of A. This helps to identify stocks with the most attractive value, growth and momentum.

Zacks Rank & Price Performance

Argo Group currently carries a Zacks Rank #2 (Buy). Year to date, the stock has lost 34.4% against the industry’s decline of 8.8%.

Zacks Investment Research
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Optimistic Growth Projections

The Zacks Consensus Estimate for 2022 earnings is pegged at $4.23, indicating an improvement of 255.5% from the year-ago reported figure on 2.7% higher revenues of $2.2 billion. The consensus mark for 2023 earnings stands at $4.83, up 14.2% from the year-ago reported figure on 5.2% higher revenues of $2.3 billion.

It has an impressive Growth Score of A.

Northbound Estimate Revision

The Zacks Consensus Estimate for 2022 earnings has moved north by a cent in the past 60 days, reflecting analyst optimism

Business Tailwinds

Argo Group’s highly profitable businesses are well-poised for growth in attractive markets.

Argo Pro, Casualty, Construction, Environmental, Inland Marine and Surety contribute two-thirds of the U.S. premium base.

ARGO remains focused on improving underwriting profitability. Exiting reinsurance operations and non-core lines of business, lowering property exposure substantially, reducing volatility and increase in rates will help ARGO achieve its target.

This U.S.-focused specialty insurer targets double-digit net earned premium growth and a combined ratio between 92 and 95 in 2022.

Argo Group is on track with its expense initiative program and estimates an expense ratio of 36 in 2022. Reducing headcount, contract review and prioritization, and footprint are helping it achieve its goal.

Argo Group consistently invests in technology, in tandem with accelerated digitalization taking place in the insurance industry. This, in turn, will improve operating efficiency and risk selection while reducing overall expenses.

Argo Group anticipates generating an operating return on common equity between 9% and 11% in 2022. ARGO boasts a solid balance sheet with modest financial leverage.

Attractive Valuation

ARGO shares are trading at a discount than the industry average. Its price-to-book value of 0.91X is lower than the industry average of 1.16X. Before valuation expands, it is preferable to take a position in the stock.

The stock has an impressive Value Score of A. Value Score helps find stocks that are undervalued. Back-tested results have shown that stocks with a favorable Value Score, when combined with a solid Zacks Rank, are the best investment bets.

Other Stocks to Consider

Some other top-ranked stocks from the property and casualty insurance industry are RLI Corp. (RLI - Free Report) , W.R. Berkley Corporation (WRB - Free Report) and HCI Group, Inc. (HCI - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

RLI’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 45.89%. In the past year, RLI stock has risen 5.6%.

The Zacks Consensus Estimate for RLI’s 2022 earnings has moved 0.7% north in the past 30 days.

W.R. Berkley’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 27.08%. In the past year, W.R. Berkley's stock has gained 35%.

The Zacks Consensus Estimate for WRB’s 2022 and 2023 earnings has moved 6.5% and 5.1% north, respectively, in the past 60 days.

The Zacks Consensus Estimate for HCI Group’s 2022 and 2023 earnings has moved 33.3% and 40% north, respectively, in the past 60 days. In the past year, HCI Group stock has lost 33.4%.

The Zacks Consensus Estimate for HCI’s 2022 and 2023 earnings per share indicates year-over-year increases of 280.9% and 75%, respectively.

 

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