Company: Selective Insurance Group Inc (NASDAQ: SIGI)
Country: USA
Sector: Financial
Industry: Insurance (Prop. & Casualty)
Suitability: long term investing; buy and hold
• Share Price: $ 66.95 (week end 15.11.2019)
• [S&P 500: $ 3120.46 (week end 15.11.2019)]
Fundamental Analysis
Summary:
*Performance: 6/10
*Security: 7/10
*Price: 4/10
(Note: If the performance and security ranking is higher than price ranking the company is supposed to be undervalued and possibly suitable for buying.)
Fundamental Analysis
Selective Insurance Group (NASDAQ:SIGI) is a financial insurance company and therefore, many financial ratios would come up significantly distorted because of the character of the business and relevant accounting policies. This is the main reason why I haven’t included some of the fundamental ratios, nevertheless I have performed all data cross-analysis and reported what we found revealing.
I looked closely at the company data over the last decade.
The company has two fundamental sources of profits, which are insurance ca 1/3 and security investing ca 2/3. The proportion has been pretty consistent over the last five years.
The company is investing primarily in available for sale fixed income securities (90.1%) where it keeps most of its assets (68.0%) (based on the last reported quarter).
I rank the investment portfolio of the company as very secure.
The sales have been growing 7.4% annually on average since 2012. This growth was pretty steady as it fluctuated between 4.7% – 9.8%.
The profits (EBIT) were growing faster than revenue from the beginning of the last decade till 2014 when the EBIT margin stabilized around 10%.
I haven’t found any more significant risk coming from financial gearing (high debt), operational gearing (high fixed cost), cyclical nature of the business, cash issues (although remaining cash is reported often negative) or any other risk.
The company has long term debt around 26% of equity (ca 6% of assets) which is not high.
There are neither preferred shares (or bonds, convertible act.) or any other form of hidden debt (such as operational leases act.)The company has been paying regular dividends over the last decade which was steady 0.13/quarter between 11/2009 – 7/2014; since 11/2014 dividends always increased in November every year to the current level of 0.23/quarter (= 1.36% annual yield; 20.37% payout ratio).
The P/E (price/earning) ratio is currently 17.04 which is quite a bargain for practically stable, reasonable performing and growing (despite of paying regular dividends) and pretty secure company.
The price to (tangible) book is only 1.87 which makes the investment even more secure also down to the fact most of the assets of the company could be converted into cash very quickly.
Technical Analysis
Summary:
*Time to Buy: 7/10
The price of the (common) stock is close to the bottom of the price channel on the monthly chart, the bottom line of the Bollinger Bands is broken on the weekly chart and it was recently broken on the daily chart.
From point of view of technical indicators and moving averages the security is slightly bullish (indicating slightly rising trend) on monthly chart and strongly bearish (indicating sinking trend) on weekly and daily charts (nevertheless this could be also interpreted as oversold security and therefore suitable condition for placing trade with higher risk/reward ratio such as 1:2 or even 1:3 if someone is willing to wait for profit longer).
From Elliot Wave point of view the security is close to the bottom of the wave C of the zigzag corrective pattern. The price could go as low as ca $64 (ca 5% lower than it is now) nevertheless it would not be advisable to rely on it as the zigzag pattern could be already completed.
*Performance
The better the performance, the higher the ranking.
Performance ranking includes both current performance and potential of the company to grow.
*Security
The more secure the company, the higher the ranking.
Security ranking answers how likely the company is to experience problems and how well it is supposed to deal with them.
*Price
The higher the price the higher the ranking.
Price ranking doesn’t take into account the performance or security of the company.
Note: If the performance and security ranking is higher than price ranking the company is supposed to be undervalued and possibly suitable for buying.
*Time to Buy
The better the time to buy, the higher the ranking.