Stock Analysis

Analysts Just Shaved Their Selective Insurance Group, Inc. (NASDAQ:SIGI) Forecasts Dramatically

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Market forces rained on the parade of Selective Insurance Group, Inc. (NASDAQ:SIGI) shareholders today, when the analysts downgraded their forecasts for this year. Both revenue and earnings per share (EPS) estimates were cut sharply as analysts factored in the latest outlook for the business, concluding that they were too optimistic previously. Selective Insurance Group shares have been sold off recently, so it will be interesting to see if today's downgrade is enough to trigger a full-on rout. The stock has already fallen 4.5% to US$79.80 in the last week.

After the downgrade, the consensus from Selective Insurance Group's five analysts is for revenues of US$3.2b in 2022, which would reflect a small 6.8% decline in sales compared to the last year of performance. Statutory earnings per share are anticipated to decrease 9.4% to US$5.13 in the same period. Before this latest update, the analysts had been forecasting revenues of US$3.6b and earnings per share (EPS) of US$5.73 in 2022. Indeed, we can see that the analysts are a lot more bearish about Selective Insurance Group's prospects, administering a substantial drop in revenue estimates and slashing their EPS estimates to boot.

See our latest analysis for Selective Insurance Group

NasdaqGS:SIGI Earnings and Revenue Growth May 10th 2022

Despite the cuts to forecast earnings, there was no real change to the US$88.00 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. There are some variant perceptions on Selective Insurance Group, with the most bullish analyst valuing it at US$90.00 and the most bearish at US$83.00 per share. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Selective Insurance Group is an easy business to forecast or the underlying assumptions are obvious.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that sales are expected to reverse, with a forecast 9.0% annualised revenue decline to the end of 2022. That is a notable change from historical growth of 7.4% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 4.6% per year. It's pretty clear that Selective Insurance Group's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Selective Insurance Group. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. The lack of change in the price target is puzzling in light of the downgrade but, with a serious decline expected this year, we wouldn't be surprised if investors were a bit wary of Selective Insurance Group.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Selective Insurance Group analysts - going out to 2023, and you can see them free on our platform here.

Of course, seeing company management invest large sums of money in a stock can be just as useful as knowing whether analysts are downgrading their estimates. So you may also wish to search this free list of stocks that insiders are buying.

What are the risks and opportunities for Selective Insurance Group?

Selective Insurance Group, Inc., together with its subsidiaries, provides insurance products and services in the United States.

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  • Trading at 21.6% below our estimate of its fair value

  • Earnings are forecast to grow 32.52% per year


  • Profit margins (6.8%) are lower than last year (10%)

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