W. R. Berkley Corporation WRB shares are trading at a premium to the Zacks Property and Casualty Insurance industry. Its price-to-book value of 2.77X is higher than the industry average of 1.56X.

WRB, one of the nation’s largest commercial lines property casualty insurance providers, has a market capitalization of $23.2 billion. The average volume of shares traded in the last three months was 1.8 million.
 

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Other insurers, such as Arch Capital Group ACGL, CNA Financial CNA and Cincinnati Financial CINF, are also trading at a premium to the industry.

W. R. Berkley shares have gained 29.1% year to date, in line with its industry, and outperforming its sector and Zacks S&P 500 composite’s return in the same time frame.

WRB vs Industry, Sector & S&P 500 Year to Date

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W. R. Berkley shares are trading well above the 50-day moving average, indicating a bullish trend.

Return on Capital

Return on equity for the trailing 12 months was 20.4%, comparing favorably with the industry’s 7.6%. This reflects its efficiency in utilizing shareholders’ funds. It envisions a long-term target of 15%.

Also, return on invested capital (ROIC) has been increasing over the last few quarters while the company raised its capital investment over the same time frame. This reflects WRB’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 10.3%, better than the industry average of 5.8%.

Factors Favoring WRB Stock

WRB’s growth strategy encompasses operating in areas where it has a competitive advantage. Thus, the insurer focuses on commercial lines, including excess and surplus lines, admitted lines and specialty personal lines. 

Its insurance business is poised to grow on the strength of several new startup units in varied business lines, expansion of international business that offers diversification benefits, rate increase, market dislocations and high retention.  

WRB remains focused on expanding selectively in attractive global markets and thus has operations in emerging markets of the United Kingdom, Continental Europe, South America, Canada, Scandinavia, Asia and Australia.

Banking on prudent underwriting, it boasts more than 60 straight quarters of favorable reserve development.

W.R. Berkley maintains a solid balance sheet with sufficient liquidity and strong cash flows.

Optimistic Analyst Sentiment Instills Confidence in WRB

The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 2 cents and 3 cents north, respectively, in the past seven days, reflecting analyst optimism.

The Zacks Consensus Estimate for 2024 earnings is pegged at $3.96, suggesting an increase of 20.7% on 11.8% higher revenues of $13.5 billion. The consensus estimate for 2025 earnings is pegged at $4.33, suggesting an increase of 9.3% on 8% higher revenues of $14.6 billion. 

The long-term earnings growth rate is expected to be 13.1%, better than the industry average of 11.2%. It has a Growth Score of B.

Average Target Price for WRB Suggests a Solid Upside

Based on short-term price targets offered by 14 analysts, the Zacks average price target is $65.14 per share. The average suggests a potential 6.3% upside from Wednesday’s closing price.

Conclusion

The insurer is set to grow on rate increases, reserving discipline, diversification benefits, momentum in international business, investment in alternative assets and consistent cash flow.

W.R. Berkley has been hiking dividends since 2005. Its dividend yield of 0.5% appears attractive compared with the industry average of 0.3%, making it an attractive pick for yield-seeking investors. It also has a VGM Score of A.

WRB’s unfavorable leverage as well as times interest earned keeps us cautious. The company has been also witnessing a rise in expenses over the past many quarters, which has been weighing on margins.

Given the fact that the shares trading at a premium, it is better to adopt a wait-and-see approach for this Zacks Rank #3 (Hold) stock in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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W.R. Berkley Corporation (WRB) : Free Stock Analysis Report

Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report

CNA Financial Corporation (CNA) : Free Stock Analysis Report

Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report

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