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The Progressive Corporation’s (NYSE:PGR) latest earnings update in December 2018 showed that the business benefited from a strong tailwind, leading to a high double-digit earnings growth of 63%. Below, I’ve presented key growth figures on how market analysts predict Progressive’s earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.
Market analysts’ prospects for the upcoming year seems buoyant, with earnings growing by a robust 11%. This growth seems to continue into the following year with rates reaching double digit 16% compared to today’s earnings, and finally hitting US$3.3b by 2022.
Although it is helpful to be aware of the rate of growth year by year relative to today’s level, it may be more beneficial estimating the rate at which the company is growing every year, on average. The advantage of this technique is that we can get a bigger picture of the direction of Progressive’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I’ve appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 7.2%. This means, we can assume Progressive will grow its earnings by 7.2% every year for the next couple of years.
For Progressive, I’ve compiled three fundamental aspects you should further examine:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is PGR worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether PGR is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of PGR? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.