Insurance Stocks

Travelers Companies Inc Valuation – November 2018 $TRV

Company Profile (excerpt from Reuters): The Travelers Companies, Inc., incorporated on March 5, 1853, is a holding company. The Company operates through three segments: Business and International Insurance; Bond & Specialty Insurance, and Personal Insurance. The Company, through its subsidiaries, is engaged in providing a range of commercial and personal property and casualty insurance products and services to businesses, government units, associations and individuals.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of TRV – November 2018

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 $34,244,049,871 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 67.01% Pass
5. Moderate PEmg Ratio PEmg < 20 13.78 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.55 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

EPSmg $9.38
MG Growth Estimate 1.93%
MG Value $116.05
Opinion Overvalued
MG Grade B+
MG Value based on 3% Growth $136.08
MG Value based on 0% Growth $79.77
Market Implied Growth Rate 2.64%
Current Price $129.31
% of Intrinsic Value 111.42%

Travelers Companies Inc qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $8.31 in 2014 to an estimated $9.38 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 2.64% 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 below the price.

At the time of valuation, further research into Travelers Companies Inc revealed the company was trading below its Graham Number of $137.64. The company pays a dividend of $2.83 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.78, which was below the industry average of 32.22, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Travelers Companies Inc performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Graham Number $137.64
PEmg 13.78
PB Ratio 1.55
Dividend Yield 2.19%
TTM Dividend $2.83
Number of Consecutive Years of Dividend Growth 12

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Long-Term Debt & Capital Lease Obligation $5,964,000,000
Total Assets $104,390,000,000
Intangible Assets $4,309,000,000
Total Liabilities $81,930,000,000
Shares Outstanding (Diluted Average) 268,400,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.63
Dec2017 $7.33
Dec2016 $10.28
Dec2015 $10.88
Dec2014 $10.70
Dec2013 $9.74
Dec2012 $6.30
Dec2011 $3.36
Dec2010 $6.62
Dec2009 $6.33
Dec2008 $4.81
Dec2007 $6.85
Dec2006 $5.91
Dec2005 $2.33
Dec2004 $1.53
Dec2003 $3.80
Dec2002 -$0.07
Dec2001 -$5.22
Dec2000 $4.24
Dec1999 $3.41
Dec1998 $0.32

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.38
Dec2017 $9.44
Dec2016 $10.19
Dec2015 $9.49
Dec2014 $8.31
Dec2013 $6.90
Dec2012 $5.48
Dec2011 $5.25
Dec2010 $6.16
Dec2009 $5.71
Dec2008 $5.02
Dec2007 $4.78
Dec2006 $3.40
Dec2005 $1.59
Dec2004 $1.10
Dec2003 $1.00
Dec2002 -$0.09

Recommended Reading:

Other ModernGraham posts about the company

10 Most Undervalued Companies for the Defensive Investor – May 2016
10 Most Undervalued Companies for the Defensive Investor – February 2016
11 Best Stocks For Value Investors This Week – 11/21/15
Travelers Companies Inc. Valuation – November 2015 Update $TRV
5 Undervalued Dow Stocks to Research – November 2015

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Selective Insurance Group Inc Valuation – July 2018 $SIGI
Genworth Financial Inc Valuation – June 2018 $GNW
Prudential Financial Inc Valuation – June 2018 $PRU
Assurant Inc Valuation – June 2018 $AIZ
Torchmark Corp Valuation – June 2018 $TMK

Disclaimer:

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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