Back to top

Argo Group Gains 26% in a Year: Will the Rally Continue?

Read MoreHide Full Article

Shares of Argo Group International Holdings, Ltd. (ARGO - Free Report) have rallied 25.7% in a year against the industry’s decrease of 8% and the Zacks S&P 500 composite index’s decline of 6.7%. With a market capitalization of $2.3 billion, average volume of shares traded in the last three months were 0.1 million.

Factors Likely to Drive the Stock Ahead

Argo Group’s strategic investment to ramp up digital initiatives has been driving premiums. The combination of upgrades to traditional IT, fine-tuning of digital strategy, deployment of new technologies from insured tech partners and initiatives undertaken at its own international solutions group, Argo Digital should continue to deliver results.

The company should continue to enjoy competitive advantage, given its underwriting expertise and successful operations at its niche markets. This apart, restructuring of the reinsurance program is expected to lower earnings volatility.

The company remains focused on prudently using capital for the business that generates attractive returns. In spite of the absence of any strategic growth opportunities, the company stated that it will enhance shareholder value by increasing dividend, giving special dividends and buying back shares.

Banking on solid capital and liquidity position, the company has been increasing its dividend. The same has doubled in the last seven years. Its dividend currently yields 1.6%, better than the industry average of 0.5%, making it an attractive pick for yield-seeking investors. The company also engages in share buybacks. A lower share count owing to share repurchases boosts the bottom line of a company.

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.

The stock has a Growth Score of B. Growth Score analyzes the growth prospects of a company. Back-tested results have shown stocks with Growth Score A or B combined with a Zacks Rank #1 (Strong Buy) and #2 (Buy) are the best investment bets.

This Zacks Rank #2 insurer boasts leadership position in U.S. Excess & Surplus lines, has a well - established multi - class Lloyd’s Syndicate platform as well as a solid Bermuda trading platform. The company is also growing in Brazil leveraging digital channels.

The Zacks Consensus Estimate for 2019 earnings per share projects an increase of 20.2% on 7.3% increase in revenues. Also, the consensus mark has moved up 1% in the past seven days.

The company has a decent surprise history, outperforming earnings expectation in three of the last four quarters with the average beat being 13.57%.

Other Stocks to Consider

Investors interested in the property and casualty insurance industry can also check out stocks like The Progressive Corporation (PGR - Free Report) , Markel Corporation (MKL - Free Report) and Berkshire Hathaway Inc. (BRK.B - Free Report) .

Progressive Corporation provides personal and commercial auto insurance, residential property insurance plus other specialty property-casualty insurance and related services, primarily in the United States. It came up with average four-quarter beat of 13.48%. The stock sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Markel markets and underwrites specialty insurance products in the United States, the United Kingdom, Canada, and internationally. It pulled off average four-quarter positive earnings surprise of 105.54%. The stock carries a Zacks Rank #2.

Berkshire Hathaway engages in insurance, freight rail transportation, and utility businesses. The company delivered average four-quarter earnings surprise of 4.31%. The stock carries a Zacks Rank #2.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

More from Zacks Analyst Blog

You May Like

Published in