Stock Analysis

Do Selective Insurance Group's (NASDAQ:SIGI) Earnings Warrant Your Attention?

  •  Updated
NasdaqGS:SIGI
Source: Shutterstock

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. Unfortunately, high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson.

So if you're like me, you might be more interested in profitable, growing companies, like Selective Insurance Group (NASDAQ:SIGI). Even if the shares are fully valued today, most capitalists would recognize its profits as the demonstration of steady value generation. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

View our latest analysis for Selective Insurance Group

Selective Insurance Group's Earnings Per Share Are Growing.

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. I, for one, am blown away by the fact that Selective Insurance Group has grown EPS by 39% per year, over the last three years. That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). The good news is that Selective Insurance Group is growing revenues, and EBIT margins improved by 8.1 percentage points to 18%, over the last year. That's great to see, on both counts.

The chart below shows how the company's bottom and top lines have progressed over time. For finer detail, click on the image.

earnings-and-revenue-history
NasdaqGS:SIGI Earnings and Revenue History September 16th 2021

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Selective Insurance Group.

Are Selective Insurance Group Insiders Aligned With All Shareholders?

I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. As a result, I'm encouraged by the fact that insiders own Selective Insurance Group shares worth a considerable sum. Given insiders own a small fortune of shares, currently valued at US$78m, they have plenty of motivation to push the business to succeed. That's certainly enough to make me think that management will be very focussed on long term growth.

Should You Add Selective Insurance Group To Your Watchlist?

Selective Insurance Group's earnings per share growth have been levitating higher, like a mountain goat scaling the Alps. That sort of growth is nothing short of eye-catching, and the large investment held by insiders certainly brightens my view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So yes, on this short analysis I do think it's worth considering Selective Insurance Group for a spot on your watchlist. You should always think about risks though. Case in point, we've spotted 2 warning signs for Selective Insurance Group you should be aware of, and 1 of them is a bit concerning.

Although Selective Insurance Group certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

If you decide to trade Selective Insurance Group, use the lowest-cost* platform that is rated #1 Overall by Barron’s, Interactive Brokers. Trade stocks, options, futures, forex, bonds and funds on 135 markets, all from a single integrated account. Promoted


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.

View Full Analysis

Rewards

  • Trading at 21.7% below our estimate of its fair value

  • Earnings are forecast to grow 32.65% per year

Risks

  • Significant insider selling over the past 3 months

  • Profit margins (6.6%) are lower than last year (12.8%)

View all Risks and Rewards

Share Price

Market Cap

1Y Return

View Company Report

Further research on
Selective Insurance Group

ValuationFinancial HealthInsider TradingManagement Team