ProAssurance Corporation PRA — a property and casualty insurance provider founded in 1976 — is having an amazing run in the stock market, outperforming the industry and the S&P 500. Strong underwriting results in the Specialty P&C segment and significant growth in investment income are aiding the stock. In the past three months, its shares have jumped 33.3%.
With this share price growth, investors may be wondering whether there's still room for further run or if the potential gains have already been fully priced in. So, should you invest in the stock at current levels or book profits?
PRA 3-Month Price Performance
Image Source: Zacks Investment Research
PRA’s Tailwinds
ProAssurance’s improving pricing decisions, new business growth and strong customer retention in the Specialty P&C segment is a major tailwind. Successful acquisitions and integrations of companiesfurther supports its premium growth. Also, net investment income jumped 36.1% and 33.8% in 2022 and 2023, respectively. We expect net investment income to grow nearly 12% year over year in 2024.
Thanks to its cost controlling efforts, PRA’s expenses are expected to decline in the coming quarters, improving margins. Total expenses fell 1.3% in the first half of the year. We expect the metric to register a 7% year-over-year decline in 2024.
Estimate Revision Favoring PRA Stock
Reflecting the positive sentiment around ProAssurance, the Zacks Consensus Estimate for earnings per share has seen upward revisions. The consensus estimate for 2024 adjusted earnings for PRA is currently pegged at 58 cents per share, indicating a significant improvement from the year-ago loss of 14 cents. The consensus mark for 2025 suggests a further 32.8% jump. The consensus estimate for 2024 and 2025 revenues are pegged at around $1.1 billion each.
Image Source: Zacks Investment Research
PRA Stock Still Trading Cheap
Despite the surge in share price, ProAssurance is trading at a discount compared to the industry average. It presents a compelling investment opportunity, with its attractive price-to-book ratio of 0.68X, lower than its five-year median of 0.88X and the industry average of 1.63X. In comparison, its peers like RLI Corp. RLI and CNA Financial Corporation CNA have a price-to-book ratio of 4.63X and 1.33X, respectively.
The Zacks average price target of $16.75 per share suggests an 11% upside for the stock from the current levels.
Image Source: Zacks Investment Research
Final Verdict: Buy PRA Now
Appealing valuation, upward trend in earnings estimates and rising investment income bode well for the company, indicating that you can consider buying shares of this insurer for greater returns in the future. Its cost-controlling efforts will continue to boost profit margins, creating significant investment opportunities. PRA currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
