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TRV Outperforms Industry, Trades at Premium: Is the Stock Still a Buy?

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Shares of The Travelers Companies, Inc. (TRV - Free Report) have gained 12.5% year to date, outperforming the industry, the Finance sector and the Zacks S&P 500 composite index in the same time frame. 

The stock is trading near its 52-week high and well above the 50-day simple moving average (SMA), indicating a bullish trend. The 50-day SMA is a key indicator for traders and analysts to identify support and resistance levels. It is considered particularly important as it is the first marker of an uptrend or downtrend. 

TRV, one of the leading writers of auto and homeowners’ insurance plus commercial U.S. property-casualty insurance, has a market capitalization of $61 billion. The average volume of shares traded in the last three months was 1.4 million.

TRV vs. Industry, Sector & S&P 500 Year to Date

Zacks Investment Research
Image Source: Zacks Investment Research

Average Target Price for TRV Suggests an Upside

Based on short-term price targets offered by 22 analysts, the Zacks average price target is $281.45 per share. The average suggests a potential 3.9% upside from the last closing price.

Bullish Analyst Sentiments but Growth Projections Mixed

The Zacks Consensus Estimate for TRV’s 2025 and 2026 earnings has moved up 6.1% and 3.4%, respectively, in the past 30 days, instilling confidence in its shares. 

The Zacks Consensus Estimate for 2025 earnings stands at $18.39, suggesting a decrease of 14.8%, while the consensus estimate for 2026 earnings stands at $24.07, suggesting an increase of 30.9%. 

The long-term earnings growth rate is expected to be 17.2%, lagging the industry average of 18.9%. 

Factors Favoring Travelers

Travelers is poised for growth, driven by solid retention rates, favorable pricing, an uptick in new business and positive renewal premium trends. The company’s broad product portfolio, covering nine distinct lines of business, provides extensive coverage options. 

Continued execution of strategic growth initiatives, combined with stable market environments, is expected to support the expansion of TRV’s auto, homeowners, and commercial insurance segments. To solidify its competitive advantage in the Bond & Specialty segment, it plans to launch products in 2025. 

Higher returns from the non-fixed income portfolio have been driving investment income over the last four years amid a low interest rate environment. Travelers estimates fixed-income NII, including earnings from short-term securities, to be $725 million after-tax in the second quarter, growing to approximately $755 million in the third quarter and then to around $790 million in the fourth quarter of 2025. The insurer expects the $100 billion investment portfolio to continue generating a higher level of predictable and reliable net investment income.

Net margin has improved 170 basis points over the last two years on prudent underwriting.

Travelers has a conservative balance sheet among its peers. The insurer remains focused on keeping the debt-to-capital ratio between 15 and 25 and has been increasing its book value for the past 10 years. TRV had $4.49 billion remaining under repurchase authorization at first-quarter 2025 end. 

Travelers’ Favorable Return on Capital

Over the trailing 12 months, its return on equity (ROE) reached 16.1%, well above the industry average of 7.8%. This highlights the company’s effective use of shareholders’ capital. Travelers aims to maintain a core ROE in the mid-teens over time.

Return on invested capital (ROIC) has steadily increased over the past few quarters, aligning with a rise in the company’s capital investments. This demonstrates TRV’s strong capability in efficiently allocating capital to drive earnings. Over the trailing 12 months, ROIC was 9.1%, surpassing the industry average of 5.9%.

TRV Shares Expensive

TRV shares are trading at a premium to the industry. Its price-to-book value of 2.18X is higher than the industry average of 1.51X. It has a Value Score of A.
 

Zacks Investment Research
Image Source: Zacks Investment Research

Shares of other insurers like The Allstate Corporation (ALL - Free Report) , Chubb Limited (CB - Free Report) and The Progressive Corporation (PGR - Free Report) are also trading at a multiple higher than the industry average.

How to Play TRV Stock

Travelers’ strong presence in auto, homeowners, and commercial U.S. property-casualty insurance provides a solid foundation for future growth. An impressive history of inorganic expansion strengthens its position. Continued momentum in renewal rate improvements, high retention levels and increased new business, supported by a well-diversified portfolio and solid capital strength, are likely to sustain its earnings growth.

Travelers has been hiking dividends for the last 21 years. Its dividend yield of 1.8% appears attractive compared with the industry average of 0.3%, making it an attractive pick for yield-seeking investors. Its VGM Score of B instills confidence.

Thus, despite its premium valuation, this Zacks Rank #2 (Buy) stock is worth adding to your portfolio

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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