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Progressive Rises 36% in a Year: Will the Bull Run Continue?

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That The Progressive Corporation (PGR - Free Report) stock is favored by investors is well corroborated by its agreeable share price movement. Shares of the company have rallied 36.3% in a year, outperforming its industry's increase of only 7.7% and the S&P 500 index’s gain of 15.5%. With a market capitalization of $34.6 billion, average volume of shares traded in the last three months was 3.2 million.


Reasons Behind the Rally

The company delivered a positive earnings surprise in the last three reported quarters with an average beat of 8.86%.

It has been continuously generating an improved top line, driven by a sustained increase in premiums as well as net investment income. The trend remained consistent in each of the three months of the second quarter of 2018.

Return on equity is a profitability measure, identifying how the company can effectively utilize its shareholders’ money. The company’s ROE expanded 490 basis points year over year to 18.9% and betters the industry average of 5.3%.

Progressive’s rates are very competitive in all its markets and it continues to gain from its extended multi-product offering. The insurer strives to become a one-stop insurance destination catering to customers, opting for a combination of home and auto.

Policy life expectancy, a measure for customer retention, has been exhibiting improvement over the last few years across all its business lines. The company has several initiatives under way, aimed at providing consumers with distinctive new auto insurance options.

Other Noteworthy Factors

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

Progressive’s concerted efforts to enhance its shareholder value should make it an attractive pick for yield-seeking investors and in turn, should continue to drive the stock.

The Zacks Consensus Estimate for earnings and revenues translates into a year-over-year improvement of 60.1% and 19.1% for 2018, respectively.

Progressive sports a Zacks Rank #1 (Strong Buy). With optimism surrounding the stock’s healthy performance, the Zacks Consensus Estimate for 2018 and 2019 has been revised about 7.4% and 5.6% upward, each, in the last 60 days.

Progressive is a Zacks Property and Casualty Insurance Industry player, currently placed in the top 42% of the Zacks Industry Rank. The industry stands to benefit from a favorable backdrop like the benign catastrophe environment, improving rate environment and rate increase. These apart, a strong job market scenario distinguished by a lowered unemployment rate and an increase in disposable income should lend support to the industry performance.

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, both Value Score and Growth Score of B make the stock a profitable pick for investors. Back tested results have shown that stocks with an impressive Style Score of A or B coupled with a bullish Zacks Rank of 1 and 2 are best lucrative options on offer.

Other Stocks to Consider

Investors interested in the property and casualty industry can also check out other top-ranked stocks like American Financial Group, Inc. (AFG - Free Report) , Everest Re Group, Ltd. (RE - Free Report) and First American Financial Corporation (FAF - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

American Financial Group provides property and casualty insurance products in the United States. It came up with an average four-quarter beat of 26.66%.

Everest Re provides reinsurance and insurance products. It pulled off an average four-quarter positive earnings surprise of 39.64%.

First American Financial provides financial services. It delivered an average four-quarter earnings surprise of 8.33%.

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