Progressive Corp Valuation – November 2015 Update $PGR

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Progressive Corp (PGR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): The Progressive Corporation is an insurance holding company. The Company’s insurance subsidiaries and mutual insurance company affiliate provide personal auto insurance, commercial auto and truck insurance principally for small businesses, and other specialty property-casualty insurance and related services. The Company’s property-casualty insurance products protect its customers against losses due to collision and physical damage to their motor vehicles, uninsured and underinsured bodily injury, and liability to others for personal injury or property damage arising out of the use of those vehicles. Its non-insurance subsidiaries and limited partnership investment affiliate support its insurance and investment operations.


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Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.


Downloadable PDF version of this valuation:

ModernGraham Valuation of PGR – November 2015

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $18,378,101,004 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 67.12% Pass
5. Moderate PEmg Ratio PEmg < 20 16.22 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.48 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

PGR value Chart November 2015

EPSmg $1.94
MG Growth Estimate 6.20%
MG Value $40.45
Opinion Fairly Valued
MG Value based on 3% Growth $28.07
MG Value based on 0% Growth $16.46
Market Implied Growth Rate 3.86%
Current Price $31.40
% of Intrinsic Value 77.62%

Progressive Corp qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings stability over the last ten years as well as the inconsistent dividend record.  The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $1.37 in 2011 to an estimated $1.94 for 2015.  This level of demonstrated earnings growth supports the market’s implied estimate of 3.86% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Progressive Corp (PGR)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

PGR Charts November 2015

Graham Number $24.06
PEmg 16.22
PB Ratio 2.48
Dividend Yield 2.18%
Number of Consecutive Years of Dividend Growth 2



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Most Recent Balance Sheet Figures

Balance Sheet Information Sep15
Long-Term Debt $2,714,300,000
Total Assets $29,935,000,000
Intangible Assets $956,900,000
Total Liabilities $22,473,000,000
Shares Outstanding (Diluted Average) 589,100,000

Earnings Per Share History

Next Fiscal Year Estimate $2.02
Dec14 $2.15
Dec13 $1.93
Dec12 $1.48
Dec11 $1.59
Dec10 $1.61
Dec09 $1.57
Dec08 -$0.10
Dec07 $1.65
Dec06 $2.10
Dec05 $1.74
Dec04 $1.91
Dec03 $1.42
Dec02 $0.75
Dec01 $0.46
Dec00 $0.05
Dec99 $0.33
Dec98 $0.51
Dec97 $0.44
Dec96 $0.34
Dec95 $0.27

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.94
Dec14 $1.85
Dec13 $1.68
Dec12 $1.44
Dec11 $1.37
Dec10 $1.30
Dec09 $1.22
Dec08 $1.19
Dec07 $1.81
Dec06 $1.79
Dec05 $1.50
Dec04 $1.23
Dec03 $0.79
Dec02 $0.46
Dec01 $0.33
Dec00 $0.29
Dec99 $0.40

Recommended Reading:

Other ModernGraham posts about the company

The Best Companies of the Insurance Industry – October 2015
15 Best Stocks For Value Investors This Week – 8/22/15
Progressive Corporation Analysis – August 2015 Update $PGR
30 Companies in the Spotlight This Week – 5/23/15
Progressive Corporation Quarterly Valuation – May 2015 $PGR

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.


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