For investors focused on public investing and long-term opportunities, The Progressive Corporation (NYSE: PGR), currently trading at $277, may be one of the top stocks to buy right now. This report delivers a scenario based Discounted Cash Flow (DCF) valuation covering Bear, Base, and Bull cases to determine the true intrinsic value of this alpha stock. It also evaluates dividend sustainability through a deep analysis of Free Cash Flow (FCF), making PGR a compelling option for those investing in equities and seeking the best long term stocks for a resilient portfolio.
All figures are in millions of USD unless otherwise stated.
I. DCF Valuation — Bear Case
- EBITDA Growth Rate: 2%
- Terminal Growth Rate: 1.5%
- Discount Rate: 9%
- Sum of PV of UFCF (2024–2029): $36,472
- Terminal Value (TV): $132,482
- PV of Terminal Value: $86,104
- Enterprise Value (EV): $122,576
- Net Debt: $76,965
- Equity Value: $45,611
- Shares Outstanding: 586M
- Intrinsic Value per Share: $339.51
II. DCF Valuation — Base Case
- EBITDA Growth Rate: 4%
- Terminal Growth Rate: 2.5%
- Discount Rate: 7.5%
- Sum of PV of UFCF (2024–2029): $40,248
- Terminal Value (TV): $221,868
- PV of Terminal Value: $154,544
- Enterprise Value (EV): $194,792
- Net Debt: $76,965
- Equity Value: $117,827
- Shares Outstanding: 586M
- Intrinsic Value per Share: $462.38
III. DCF Valuation — Bull Case
- EBITDA Growth Rate: 6%
- Terminal Growth Rate: 3.5%
- Discount Rate: 6.5%
- Sum of PV of UFCF (2024–2029): $43,861
- Terminal Value (TV): $411,894
- PV of Terminal Value: $300,634
- Enterprise Value (EV): $344,495
- Net Debt: $76,965
- Equity Value: $267,530
- Shares Outstanding: 586M
- Intrinsic Value per Share: $717.09
IV. Valuation Summary and Upside Potential
- Current Price: $277
- Bear Case Intrinsic Value: $339.51 → 23% upside
- Base Case Intrinsic Value: $462.38 → 67% upside
- Bull Case Intrinsic Value: $717.09 → 159% upside
V. Dividend Sustainability Analysis
- Dividend per Share: $4.90
- Shares Outstanding: 586M
- Total Dividends Paid: 586 × 4.90 = $2,871M
- Free Cash Flow (Used for Analysis): $15,733M
- Dividend Payout Ratio (FCF Basis):
- $2,871 / $15,733 = 0.182 or ~18.2%
- Assessment:
- Payout ratio is very low, leaving over 80% of FCF retained
- Significant cushion to maintain or increase dividends even in lower UFCF scenarios
- Conclusion: Dividend appears highly sustainable with ample coverage by free cash flow
VI. Summary View
This analysis maintains a strict data-centric discipline. Each scenario represents a clearly defined outlook in terms of macroeconomic assumptions and company performance.
- DCF Takeaway: At $277, PGR trades significantly below its modeled fair value under every scenario
- Dividend Outlook: Excellent sustainability, with only 18% of FCF required to cover dividends
- Quantitative Conclusion: PGR appears undervalued in all modeled cases, with upside ranging from 23% to 159%
Valuation Range: $339.51 – $717.09
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