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Here's Why Travelers (TRV) Stock is an Investor Favorite Now
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The Travelers Companies, Inc.’s (TRV - Free Report) compelling portfolio, strong retention rates, positive renewal premium changes, strong returns from the non-fixed income portfolio and sufficient liquidity make the stock worth adding to investors’ portfolios.
Shares of TRV, one of the leading writers of auto and homeowners’ insurance plus commercial U.S. property-casualty insurance, have gained 21.2%, outperforming the industry’s increase of 17.6%, the Finance sector’s rise of 3.8% and the Zacks S&P 500 composite’s increase of 9.2% in the same period.
Travelers has a VGM Score of A and a Zacks Rank #2 (Buy). VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.
Image Source: Zacks Investment Research
Northbound Estimate Revision
The Zacks Consensus Estimate for Travelers’ 2024 and 2025 earnings has moved 2 cents and 1 cent north, respectively, in the past 30 days, reflecting analysts’ optimism.
Return on Capital
Travelers’ return on equity for the trailing 12 months is 13.7%, which compares favorably with the industry’s 7.4%, reflecting the company’s efficiency in utilizing shareholders’ funds. Also, the return on invested capital of 7% outperforms the industry average of 5.5%. This reflects TRV’s efficiency in utilizing funds to generate income.
Can it Retain the Momentum?
Premiums, the major component of an insurer’s top line, should continue to benefit from strong retention rates, positive renewal premium changes and higher new business premiums in both Domestic Automobile and Domestic Homeowners.
Given the progress and continued growth of the agency auto and homeowners business, TRV remains optimistic about the trajectory of its personal lines business.
Higher average levels of invested assets, improved results from the fixed-income portfolio and strong returns from the non-fixed-income portfolio should drive better net investment income.
In tandem with industry trends, the insurer continues to deploy funds in technology. Its balance sheet strength, driven by scale, profitability and cash flow, supports it in investing more than $1 billion annually in technology.
Being a property and casualty insurer, TRV is exposed to cat losses, which induce volatility in profits. Nevertheless, its active reinsurance programs limit losses.
Its long-term financial strategy encompasses delivering improved earnings by generating capital in excess of growth needs, maintaining a balanced approach to rightsizing capital and growing book value per share over time.
Notably, its free cash flow conversion has remained more than 100% over many years, reflecting its solid earnings.
Distributing Wealth to Investors
TRV has raised dividends for the last 19 years at a compound annual growth rate of 8%. Its current dividend yield of 1.8% is better than the industry average of 0.3%. This makes TRV an attractive pick for yield-seeking investors.
It also has $6.04 billion of capacity remaining under its share repurchase authorizations.
Optimistic Growth Projection
The Zacks Consensus Estimate for Travelers’ 2024 earnings is pegged at $17.70 per share, indicating a 34.8% increase from the year-ago reported figure on 11.8% higher revenues of $46.4 billion. The consensus estimate for 2025 earnings is pegged at $20.12 per share, indicating a 13.7% increase from the year-ago reported figure on 8.3% higher revenues of $50.2 billion. The expected long-term earnings growth is pegged at 10.8%.
Buying Opportunity
This property & casualty insurer has a Value Score of A, reflecting an attractive valuation. Back-tested results have shown that stocks with a Growth Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2 offer better returns.
Heritage Insurance delivered a trailing four-quarter average earnings surprise of 287.25%. The stock has gained 59.2% year to date. The Zacks Consensus Estimate for HRTG’s 2024 and 2025 earnings has moved 7% and 18.7% north, respectively, in the past 30 days.
Progressive beat estimates in two of the last four quarters while missing estimates on the other two occasions. The stock has gained 31.1% year to date. The Zacks Consensus Estimate for PGR’s 2024 and 2025 earnings indicates a year-over-year increase of 61.7% and 12.2%, respectively.
Mercury General delivered a trailing four-quarter average earnings surprise of 3417.48%. The stock has gained 35.7% year to date. The Zacks Consensus Estimate for MCY’s 2024 and 2025 earnings indicates a year-over-year increase of 866.7% and 34.5%, respectively.
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Here's Why Travelers (TRV) Stock is an Investor Favorite Now
The Travelers Companies, Inc.’s (TRV - Free Report) compelling portfolio, strong retention rates, positive renewal premium changes, strong returns from the non-fixed income portfolio and sufficient liquidity make the stock worth adding to investors’ portfolios.
Shares of TRV, one of the leading writers of auto and homeowners’ insurance plus commercial U.S. property-casualty insurance, have gained 21.2%, outperforming the industry’s increase of 17.6%, the Finance sector’s rise of 3.8% and the Zacks S&P 500 composite’s increase of 9.2% in the same period.
Travelers has a VGM Score of A and a Zacks Rank #2 (Buy). VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.
Image Source: Zacks Investment Research
Northbound Estimate Revision
The Zacks Consensus Estimate for Travelers’ 2024 and 2025 earnings has moved 2 cents and 1 cent north, respectively, in the past 30 days, reflecting analysts’ optimism.
Return on Capital
Travelers’ return on equity for the trailing 12 months is 13.7%, which compares favorably with the industry’s 7.4%, reflecting the company’s efficiency in utilizing shareholders’ funds. Also, the return on invested capital of 7% outperforms the industry average of 5.5%. This reflects TRV’s efficiency in utilizing funds to generate income.
Can it Retain the Momentum?
Premiums, the major component of an insurer’s top line, should continue to benefit from strong retention rates, positive renewal premium changes and higher new business premiums in both Domestic Automobile and Domestic Homeowners.
Given the progress and continued growth of the agency auto and homeowners business, TRV remains optimistic about the trajectory of its personal lines business.
Higher average levels of invested assets, improved results from the fixed-income portfolio and strong returns from the non-fixed-income portfolio should drive better net investment income.
In tandem with industry trends, the insurer continues to deploy funds in technology. Its balance sheet strength, driven by scale, profitability and cash flow, supports it in investing more than $1 billion annually in technology.
Being a property and casualty insurer, TRV is exposed to cat losses, which induce volatility in profits. Nevertheless, its active reinsurance programs limit losses.
Its long-term financial strategy encompasses delivering improved earnings by generating capital in excess of growth needs, maintaining a balanced approach to rightsizing capital and growing book value per share over time.
Notably, its free cash flow conversion has remained more than 100% over many years, reflecting its solid earnings.
Distributing Wealth to Investors
TRV has raised dividends for the last 19 years at a compound annual growth rate of 8%. Its current dividend yield of 1.8% is better than the industry average of 0.3%. This makes TRV an attractive pick for yield-seeking investors.
It also has $6.04 billion of capacity remaining under its share repurchase authorizations.
Optimistic Growth Projection
The Zacks Consensus Estimate for Travelers’ 2024 earnings is pegged at $17.70 per share, indicating a 34.8% increase from the year-ago reported figure on 11.8% higher revenues of $46.4 billion. The consensus estimate for 2025 earnings is pegged at $20.12 per share, indicating a 13.7% increase from the year-ago reported figure on 8.3% higher revenues of $50.2 billion. The expected long-term earnings growth is pegged at 10.8%.
Buying Opportunity
This property & casualty insurer has a Value Score of A, reflecting an attractive valuation. Back-tested results have shown that stocks with a Growth Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2 offer better returns.
Other Stocks to Consider
Some other top-ranked stocks from the same space are Heritage Insurance (HRTG - Free Report) , The Progressive Corporation (PGR - Free Report) and Mercury General (MCY - Free Report) , each sporting a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Heritage Insurance delivered a trailing four-quarter average earnings surprise of 287.25%. The stock has gained 59.2% year to date. The Zacks Consensus Estimate for HRTG’s 2024 and 2025 earnings has moved 7% and 18.7% north, respectively, in the past 30 days.
Progressive beat estimates in two of the last four quarters while missing estimates on the other two occasions. The stock has gained 31.1% year to date. The Zacks Consensus Estimate for PGR’s 2024 and 2025 earnings indicates a year-over-year increase of 61.7% and 12.2%, respectively.
Mercury General delivered a trailing four-quarter average earnings surprise of 3417.48%. The stock has gained 35.7% year to date. The Zacks Consensus Estimate for MCY’s 2024 and 2025 earnings indicates a year-over-year increase of 866.7% and 34.5%, respectively.