Alleghany Corporation Y is well-poised for growth on the back of solid segmental results, strategic buyouts and robust cash position.
The company is well poised for progress as is evident from its favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.
The company has a decent surprise history. It surpassed the Zacks Consensus Estimate in two of the trailing four quarters, the average beat being 34.08%.
The property and casualty insurer continues to benefit from the solid performance of its Reinsurance as well as Insurance segments, primarily at RSUI Group, Inc. (RSUI). At the Reinsurance segment, improving rates, growth in various traditional casualty and other professional liability lines of business in the United States and U.K., as well as the impact of changes in foreign exchange rates support the premium growth.
Premium growth at RSUI is likely to be driven by higher rates, improved general market conditions and growth in most lines of business due to increases in business opportunities.
Moreover, Alleghany remains focused on net new business growth and acquisitions for expanding existing capabilities, reinforcing global presence and boosting top-line growth. Through its subsidiaries, the company pursues acquisitions, which not only widen its geographical presence but also boost its portfolio.
In the second quarter of 2020, it acquired 55% interest in Wilbert Funeral Services, Inc. whose solid business model aided Alleghany Capital to leverage potential growth opportunities prevailing in noninsurance markets. In the same time frame, it also acquired Kelly Toys Holdings, LLC to grow into a leading toy industry platform with the combination of Jazwares', Alleghany’s subsidiary, unique operating capabilities and Alleghany Capital's financial backing.
Alleghany boasts a solid balance sheet with high liquidity and improving leverage. Its debt to capital of 19.1% betters the industry average of 20.6%. The company exited the third quarter with $1.3 billion in cash balance. Also, it has access to unsecured revolving credit facility $300.0 million, which is scheduled to expire on Jul 31, 2022.
The Zacks Consensus Estimate for 2021 earnings per share is pegged at $45.3, indicating year-over-year increase of nearly 187.62%.
Shares of this Zacks Rank #3 (Hold) property and casualty insurer have rallied 35.7% in the past six months, outperforming the industry's 25.6% growth. Moreover, its solid fundamentals are likely to help the stock retain its momentum.
Stocks to Consider
Some better-ranked stocks from the same space are Arch Capital Group Ltd. ACGL, Everest Re Group, Ltd. RE and Markel Corporation MKL, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Arch Capital Group surpassed bottom-line estimates in three of the last four quarters. It has a trailing four-quarter earnings surprise of 31.76%, on average.
Everest Re surpassed bottom-line estimates in three of the last four quarters. It has a trailing four-quarter earnings surprise of 9.54%, on average.
Markel surpassed bottom-line estimates in three of the last four quarters. It has a trailing four-quarter earnings surprise of 143.46%, on average.
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