It hasn't been a great afternoon session for The Progressive investors, who have watched their shares sink by -1.4% to a price of $190.78. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
Trades Below Its Graham Number but Has an Elevated P/B Ratio:
The Progressive Corporation, an insurance holding company, provides personal and commercial auto, personal residential and commercial property, business related general liability, and other specialty property-casualty insurance products and related services in the United States. The company belongs to the Finance sector, which has an average price to earnings (P/E) ratio of 12.38 and an average price to book (P/B) ratio of 1.58. In contrast, The Progressive has a trailing 12 month P/E ratio of 29.0 and a P/B ratio of 5.64.
When we divideThe Progressive's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.82, which indicates that the market is undervaluing the company's projected growth (a PEG ratio of 1 indicates a fairly valued company). Your analysis of the stock shouldn't end here. Rather, a good PEG ratio should alert you that it may be worthwhile to take a closer look at the stock.
Increasing Revenues but Narrowing Margins:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $31,979 | $39,022 | $42,658 | $47,702 | $49,611 | $58,687 |
| Interest Income (M) | $166 | $190 | $217 | $219 | $244 | $262 |
| Operating Margins | 10% | 13% | 17% | 9% | 2% | 6% |
| Net Margins | 8% | 10% | 13% | 7% | 1% | 5% |
| Net Income (M) | $2,615 | $3,970 | $5,705 | $3,351 | $722 | $2,741 |
| Depreciation & Amort. (M) | $190 | $240 | $275 | $280 | $306 | $290 |
| Diluted Shares (M) | 587 | 587 | 588 | 587 | 587 | 588 |
| Earnings Per Share | $4.42 | $6.72 | $9.66 | $5.66 | $1.18 | $4.61 |
| EPS Growth | n/a | 52.04% | 43.75% | -41.41% | -79.15% | 290.68% |
| Avg. Price | $53.69 | $66.42 | $79.01 | $93.11 | $110.63 | $190.51 |
| P/E Ratio | 12.07 | 9.84 | 8.14 | 16.36 | 92.97 | 41.24 |
| CAPEX (M) | $266 | $364 | $224 | $244 | $292 | $217 |
