On Monday, Progressive Corp. (NYSE:PGR) experienced an adjustment in its stock outlook as Roth/MKM maintained a Buy rating and increased the price target to $235 from the previous $215. The revision reflects a positive view on the company's future earnings potential and takes into consideration the current higher interest rates that could boost investment income.
The analyst's revised earnings estimates for Progressive are now set at $9.55 for 2024 and $10.45 for 2025, up from the previous forecasts of $8.60 and $10.30, respectively. The new projections are described as possibly conservative, acknowledging the inherent challenges in predicting the company's growth trajectory over the coming years.
Despite acknowledging that Progressive's stock is not inexpensive, trading at over six times its book value, the analyst pointed to historical precedents where the company's valuation reached similar or higher levels during periods of growth. The increased price target is based on a 22.5 times price-to-earnings (P/E) multiple on the estimated operating earnings per share (EPS) for 2025, and a 4.4 times multiple on the expected book value for the same year, excluding accumulated other comprehensive income (AOCI).
Roth/MKM commentary suggests a belief in Progressive's ability to outperform, despite the high valuation, due to the company's growth prospects. The decision to maintain the Buy rating while raising the price target indicates confidence in Progressive's performance moving forward.
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