Beating S&P500 BY 11% YTD, What To Expect From Travelers Stock?

+9.50%
Upside
208
Market
228
Trefis
TRV: The Travelers Companies logo
TRV
The Travelers Companies

Travelers’ stock (NYSE: TRV) has gained 20% YTD, as compared to the 9% rise in the S&P500 index over the same period. Further, it is currently trading at around $229 per share, which is 4% above its fair value of $220 – Trefis’ estimate for Travelers’ valuation.

Amid the current financial backdrop, TRV stock has seen extremely strong gains of 65% from levels of $140 in early January 2021 to around $230 now, vs. an increase of about 40% for the S&P 500 over this roughly 3-year period. TRV is one of a handful of stocks that have increased their value in each of the last 3 years, but that still wasn’t enough for it to consistently beat the market. Returns for the stock were 11% in 2021, 20% in 2022, and 2% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that TRV underperformed the S&P in 2021 and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Financials sector including JPM, V, and MA, and even for the megacap stars GOOG, TSLA, and MSFT. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could TRV face a similar situation as it did in 2021 and 2023 and underperform the S&P over the next 12 months – or will it see a strong jump?

The insurance giant outperformed the street estimates in the fourth quarter of 2023, with revenues increasing 13% y-o-y to $10.9 billion. It was primarily driven by a similar growth in the net written premiums to $9.97 billion. Notably, the net written premiums were up due to a 15% increase in personal insurance, followed by a 14% gain in the business insurance segment. On the cost front, the claims expenses as a % of revenues witnessed a favorable decrease from 89.7% to 81.5%. Overall, the net income almost doubled to $1.6 billion in the quarter. 

Relevant Articles
  1. Down 7% In A Day, Where Is Travelers Stock Headed?
  2. Travelers Stock Is Undervalued
  3. What Is Happening With Travelers Stock?
  4. What To Expect From Travelers Stock?
  5. Where Is Travelers Stock Headed?
  6. Is Travelers Stock Fairly Priced?

The company’s top line grew 12% y-o-y to $41.3 billion in FY 2023. It was mainly due to a 12% rise in the net written premiums figure, followed by a 14% improvement in the net investment income. On the flip side, the claims and expenses as a % of revenues increased over the same period, partially offsetting the positive impact of revenue growth. Altogether, the net income increased 5% y-o-y to $2.99 billion.

Moving forward, we expect the same trend to continue in Q1. Overall, Travelers revenues are forecast to touch $44.5 billion in FY2024. Additionally, TRV’s adjusted net income is likely to remain around $4.1 billion in the year. This coupled with an annual GAAP EPS of $18.04 and a P/E multiple of just above 12x will lead to a valuation of $220.

 Returns Mar 2024
MTD [1]
2024
YTD [1]
2017-24
Total [2]
 TRV Return 4% 20% 87%
 S&P 500 Return 2% 9% 132%
 Trefis Reinforced Value Portfolio 1% 6% 652%

[1] Returns as of 3/28/2024
[2] Cumulative total returns since the end of 2016

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates