The Progressive Corporation’s stock price has surged to a price of $154.95 today. With their 8.1% increase, PGR shares outpaced both the S&P 500 and Dow Industrial composite indices by -0.0%, closing in on their 52 week high of $155.38 Over the last 12 months, Progressive is up 34.0%, and has outperformed the S&P 500 by 12.0%. Now, the large-cap Finance company is 8.15% above its average target price of $143.27 and has an average analyst rating of hold.
Progressive's trailing 12 month price to earnings (P/E) ratio is 53.2, which is its share price divided by its trailing earnings per share (EPS) of $2.91. The company has a forward P/E ratio of 20.6 based on its forward EPS of $7.54 -- which is an estimate of future earnings provided by management. The P/E ratio tells us how much investors are willing to pay for each dollar of the company's net earnings from its sales operations. By way of comparison, the average P/E ratio of the Finance sector is 14.34, but a company's price can remain stable for a long time even if it is over or undervalued.
Another metric for valuing a stock is its Price to Book (P/B) Ratio, which consists in its share price divided by its book value per share. The book value refers to the present value of the company if it were liquidated today (i.e. selling all assets and paying off all debts). Progressive's P/B ratio indicates that the market value of the company exceeds its book value by a factor of 5.0, so the company's assets may be overvalued compared to the average P/B ratio of the Finance sector, which stands at 1.57.
PGR's average free cash flow over the last few years is $6.34 Billion, which represents the sum of inflows and outflows of cash from all sources, including capital expenses.. This is the pool of liquidity that the company can use to reinvest in its business or pay out to its equity investors in the form of a dividend. Over the last twelve months investors in Progressive have enjoyed a dividend yield of 0.1%.
Since it has a an inflated P/E ratio, an elevated P/B ratio, irregular cash flows, and decent operating margins, Progressive is probably overvalued at current prices. Make sure to complement this brief quantitative review with a qualitative analysis of your own!