Selective Insurance Group has been treading water for the past six months, recording a small loss of 2.1% while holding steady at $83.20. The stock also fell short of the S&P 500’s 13.9% gain during that period.
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Why Is Selective Insurance Group Not Exciting?
We're cautious about Selective Insurance Group. Here are three reasons we avoid SIGI and a stock we'd rather own.
2. Recent EPS Growth Below Our Standards
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Selective Insurance Group’s EPS grew at a weak 9.2% compounded annual growth rate over the last two years, lower than its 13.3% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
3. Steady Increase in BVPS Highlights Solid Asset Growth
In the insurance industry, book value per share (BVPS) provides a clear picture of shareholder value, as it represents the total equity backing a company’s insurance operations and growth initiatives.
Although Selective Insurance Group’s BVPS increased by a meager 6.4% annually over the last five years, the good news is that its growth has recently accelerated as BVPS grew at a solid 16.2% annual clip over the past two years (from $40.35 to $54.46 per share).
Final Judgment
Selective Insurance Group isn’t a terrible business, but it doesn’t pass our bar. With its shares lagging the market recently, the stock trades at 1.5× forward P/B (or $83.20 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. Let us point you toward a fast-growing restaurant franchise with an A+ ranch dressing sauce.
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