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Navigators Group Stock Rallies 13% in a Year: Here's Why

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That The Navigators Group, Inc. (NAVG - Free Report) stock is favored by investors is confirmed by its share price movement. The stock has rallied nearly 12% in a year compared with its industry's increase of 13%. With a market capitalization of $1.7 billion, average volume of shares traded in the last three months were 0.1 million.


 

What’s Behind the Rally?

The company delivered a positive earnings surprise in three of the last four quarters with an average beat of 14.66%.

The company has benefited from operational efficiency across all segments. The last reported quarter generated record level of operating earnings on double digit premium growth. The first quarter of 2018 encouraged with solid results at the International Insurance segment, which has been weighing on overall underwriting results over the last eight quarters.

Lower tax rate due to the overhaul in tax policy, which slashed the rate to 21% from 35%, might lend an additional boost to the bottom line.

The International Insurance segment benefited from better results at its International Marine, which remains the largest business of this segment. The company identifies Continental Europe and Latin America to offer best growth prospects for ocean marine in the short to intermediate term.

In fact, the company’s pending acquisition of the Belgium-domiciled insurance company and a related underwriting agency known as ASCO and BDM, respectively, is a strategic move to ramp up its business in Continental Europe as well as have an EU-domiciled insurance company post Brexit.

Navigators Group has been witnessing improving net investment income, driven by growth in investment assets from operating cash flows and higher yields in Fixed Maturities portfolio. Given the Fed’s hint to raise interest rates thrice in 2018, we expect the momentum to sustain.

Return on equity came in at 3.9% (expanded 100 bps from 2017 end). Tangible book value increased 2.5%, sequentially.

Other Noteworthy Factors

Navigators Group carries a Zacks Rank #2 (Buy). With optimism surrounding the stock’s healthy performance, the Zacks Consensus Estimate for 2018 and 2019 has been revised about 6.8% and 1.7% upward, respectively, in the last 30 days.

The consensus estimate for earnings and revenues translates into a respective year-over-year improvement of 156.9% and 124% for 2018. The consensus mark for 2019 earnings represents an increase of 0.8% on 5.4% stronger revenues.

The stock carries a favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of all three factors. In fact Growth Score of B makes the stock an attractive pick for investors. Backtested results have shown that stocks with an impressive Style Score of A or B coupled with a bullish Zacks Rank #1 (Strong Buy) and 2 are the best lucrative options on offer.

Other Stocks to Consider

Some other top-ranked insurers are Alleghany Corporation (Y - Free Report) , CNA Financial Corporation (CNA - Free Report) and Markel Corporation (MKL - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. It came up with an average four-quarter beat of 17.61%.

CNA Financial provides commercial property and casualty insurance products, primarily in the United States. It pulled off an average four-quarter positive earnings surprise of 47.96%.

Markel markets and underwrites specialty insurance products in the United States, the United Kingdom, Canada and internationally. It delivered an average four-quarter beat of 15.54%.

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