THG Investors - Our Quick Report For You.

Hanover Insurance logged a -0.8% change during today's morning session, and is now trading at a price of $120.05 per share.

Hanover Insurance returned losses of -18.9% last year, with its stock price reaching a high of $151.78 and a low of $115.26. Over the same period, the stock underperformed the S&P 500 index by -18.0%. As of April 2023, the company's 50-day average price was $128.07. The Hanover Insurance Group, Inc., through its subsidiaries, provides various property and casualty insurance products and services in the United States. Based in Worcester, MA, the mid-cap Finance company has 4,600 full time employees. Hanover Insurance has offered a 2.5% dividend yield over the last 12 months.

Increasing Revenues but Narrowing Margins:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $4,891 $4,827 $5,228 $5,469
Interest Income -$37,500 -$37,100 -$34,000 -$34,100
Net Margins 8.69% 7.43% 8.01% 2.12%
Net Income (MM) $425 $359 $419 $116
Depreciation & Amort. -$21,600 -$18,200 -$16,900 -$12,900
Earnings Per Share $10.46 $9.42 $11.49 $3.23
EPS Growth n/a -9.94% 21.97% -71.89%
Diluted Shares (MM) 41 38 36 36
Free Cash Flow (MM) $590 $693 $816 $704
Capital Expenditures (MM) -$13 -$15 -$8 -$18
Long Term Debt $653,400 $780,800 $781,600 $782,400
Net Debt / EBITDA 0.98 1.33 0.96 2.51

Hanover Insurance has stable revenues and increasing reinvestment in the business and a steady stream of strong cash flows. Additionally, the company's financial statements display decent net margins with a negative growth trend and reasonable leverage. However, the firm has declining EPS growth.

Hanover Insurance's Valuation Is in Line With Its Sector Averages:

Hanover Insurance has a trailing twelve month P/E ratio of 39.7, compared to an average of 14.34 for the Finance sector. Based on its EPS guidance of $12.23, the company has a forward P/E ratio of 10.5. The 3.2% compound average growth rate of Hanover Insurance's historical and projected earnings per share yields a PEG ratio of 12.48. This suggests that these shares are overvalued. Furthermore, Hanover Insurance is likely overvalued compared to the book value of its equity, since its P/B ratio of 1.84 is higher than the sector average of 1.57. The company's shares are currently trading 6.5% above their Graham number. In conclusion, Hanover Insurance's impressive cash flow trend, decent P/B ratio, and reasonable use of leverage demonstrate that the company may still be fairly valued — despite its elevated earnings multiple.

Hanover Insurance Has an Analyst Consensus of Some Upside Potential:

The 6 analysts following Hanover Insurance have set target prices ranging from $141.0 to $170.0 per share, for an average of $149.83 with a buy rating. As of April 2023, the company is trading -14.5% away from its average target price, indicating that there is an analyst consensus of some upside potential.

Hanover Insurance has a very low short interest because 1.5% of the company's shares are sold short. Institutions own 89.6% of the company's shares, and the insider ownership rate stands at 0.87%, suggesting a small amount of insider investors. The largest shareholder is the Vanguard Group, Inc., whose 10% stake in the company is worth $445,610,514.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.