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News Breaks
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November 1, 2009
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| 18:49 EDT |  | PGR |
| theflyonthewall.com: | Progressive looks undervalued and could jump at least 25%, Barron's reports | | Progressive (PGR) has consistently posted some of the best financial results in property-casualty insurance. As one of the top companies in a fragmented industry, Progressive has an excellent chance to gain more market share. Progressive pays a low and variable dividend, favors share buybacks and has a strong balance sheet, with $1B of excess capital. The insurer's shares look appealing because they trade at a historically low valuation, just as the company's revenue and profits are poised to expand for the first time in several years. Now around $16, Progressive trades at 11x projected 2009 profit of $1.47 a share. Wall Street's 2010 consensus estimate is $1.45. Yet bulls, like Goldman Sachs analyst Chris Neczypor, see it nearer $1.60 -- which would mean the company is fetching a reasonable 10x next year's profit, compared with its historic P/E ratio of 14. The stock commands two times book value, which is rich compared with most peers, but near its low of the past 15 years and under its historic average of three. In September, Neczypor raised Progressive's rating to Buy from Sell, with a price target of $21, saying it "should benefit from both rate and volume increases" as cost-conscious drivers switch to low-cost direct coverage sold without agents, a market led by Geico and Progressive. Barron's also notes, that one longtime holder of the stock argues earnings could top $2 in 2012, resulting in a price in the mid- to high $20s. Reference Link :theflyonthewall.com |
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