Yahoo Finance Here's Why You Should Stay Invested in Travelers (TRV) Stock
The Travelers Companies, Inc. TRV is poised to gain from the strength of strong renewal rate change, retention and increase in new business supported by a compelling portfolio and solid capital position. These, along with solid growth projections, make the stock worth retaining.
Travelers has an impressive VGM Score of B. This style score rates stocks on their combined weighted styles, helping to identify those with the most attractive value, best growth and momentum.
TRV, one of the leading writers of auto and homeowners’ insurance plus commercial U.S. property-casualty insurance, currently carries a Zacks Rank #3 (Hold).
An Outperformer
Shares have gained 16% in the past six months, outperforming the industry’s increase of 13.9%. The Finance sector and the Zacks S&P 500 composite increased 7.9% and 9.6%, respectively. With a market capitalization of $48.8 billion, the average volume of shares traded in the last three months was 1.2 million.
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Northbound Estimate Revision
The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 1 cent and 2 cents north, respectively, in the past 30 days, reflecting analyst optimism.
Return on Capital
Return on equity (ROE) for the trailing 12 months was 13.9%, comparing favorably with the industry’s 7.8%. This reflects its efficiency in utilizing shareholders’ funds. Sustained operational excellence helped generate double-digit core ROE in nine out of the last 10 years. Travelers aims to generate mid-teens core ROE over time.
Also, return on invested capital (ROIC) in the trailing 12 months was 7.2%, better than the industry average of 5.9%.This reflects TRV’s efficiency in utilizing funds to generate income.
Optimistic Growth Projection
The Zacks Consensus Estimate for 2024 earnings stands at $17.86, suggesting an increase of 36% on 11.7% higher revenues of $46.3 billion. The consensus estimate for 2025 earnings stands at $20.42, suggesting an increase of 14.3% on 7.9% higher revenues of $50 billion.
The long-term earnings growth is expected to be 10.8%, better than the industry average of 10.2%. We expect the 2026 bottom line to witness a three-year CAGR of 21.6%. It has a Growth Score of B.
Growth Drivers
A compelling product portfolio of coverages across nine lines of business should continue to help Travelers maintain high levels of retention, improve pricing and increase new business while achieving a positive renewal premium change.
Higher returns from the non-fixed income portfolio have been driving investment income over the last four years amid a low-interest rate environment. Travelers expects after-tax net investment income from the non-fixed income portfolio, including earnings from short-term securities, to be $640 million in the second quarter, $665 million in the third quarter and $690 million in the fourth quarter.
Being a P&C insurer, TRV is exposed to catastrophe events, inducing volatility in underwriting profitability. However, the insurer has an active catastrophe reinsurance program, which lends support in absorbing losses.
Solid Balance Sheet
Travelers maintains a conservative balance sheet among its peers. The insurer remains focused on keeping the debt-to-capital ratio between 15 and 25 and has been increasing its book value for the past 10 years. TRV had $5.79 billion remaining under repurchase authorization at first-quarter 2024 end.
Dividend History
Riding on a solid capital position, Travelers has been hiking dividends for the last 20 years. Its dividend yield of 1.8% appears attractive compared with the industry average of 0.3%, making it an attractive pick for yield-seeking investors.
Stocks to Consider
Some top-ranked stocks from the insurance industry are HCI Group, Inc. HCI, Palomar Holdings PLMR and ProAssurance PRA, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
HCI Group earnings surpassed estimates in each of the last four quarters, the average beat being 139.15%. In the past year, HCI has rallied 10.5%.
The Zacks Consensus Estimate for HCI’s 2024 and 2025 earnings implies 57.6% and 4.3% year-over-year growth, respectively.
Palomar’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 15.10%. In the past year, PLMR’s stock has surged 54.8%.
The Zacks Consensus Estimate for PLMR’s 2024 and 2025 earnings indicates 25.8% and 16.1% year-over-year growth, respectively.
ProAssurance earnings surpassed estimates in two of the last four quarters and missed in the other two. In the past year, PRA’s stock has lost 2.5%.
The Zacks Consensus Estimate for PRA’s 2024 and 2025 earnings suggests 371.4% and 71.6% year-over-year growth, respectively.
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The Travelers Companies, Inc. (TRV) : Free Stock Analysis Report
ProAssurance Corporation (PRA) : Free Stock Analysis Report
HCI Group, Inc. (HCI) : Free Stock Analysis Report
Palomar Holdings, Inc. (PLMR) : Free Stock Analysis Report
