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Chubb Stock Trading Near 52-Week High: What Should Investors Know?
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Shares of Chubb Limited (CB - Free Report) closed at $290.58 on Thursday, near its 52-week high of $294.18. A compelling portfolio, strong renewal retention, positive rate increases, strategic initiatives to fuel profitability and a solid capital position are driving the price higher.
Chubb is one of the world’s largest providers of property and casualty (P&C) insurance and reinsurance and the largest publicly traded P&C insurer based on a market capitalization of $117.4 billion. Earnings grew 19.4% in the last five years, better than the industry average of 10.5%. The expected long-term earnings growth rate is 2.4%. The Zacks Consensus Estimate for 2024 has moved 1.1% north in the past 60 days, reflecting investor optimism.
Shares have rallied 28.6% year to date, in line with the industry’s increase and outperforming the Finance sector’s increase of 15.3% and the S&P 500 composite’s rise of 19.8%.
CB vs Industry, Sector, S&P 500 YTD
Image Source: Zacks Investment Research
CB shares are trading well above the 50-day moving average, indicating a bullish trend.
CB’s Return on Capital
Return on equity in the trailing 12 months was 15.8%, better than the industry average of 8%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.
Also, return on invested capital (ROIC) has been increasing over the last few quarters amid capital investments made over the same time frame. This reflects CB’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 10.3%, better than the industry average of 6%.
Factors Favoring CB?
Chubb is poised for long-term growth as it capitalizes on the potential of middle-market businesses (both domestic and international) as well as enhances traditional core packages and specialty products. The insurer is also making strategic investments in various initiatives that will accelerate growth.
Chubb pursues strategic mergers and acquisitions to diversify its portfolio, add capabilities and synergies and expand its geographic footprint. Acquisitions have also improved premium revenues, the major component of the insurer’s top line. Premiums should also benefit from commercial P&C rate increases, new business and strong renewal retention.
The Fed recently cut interest rate by 50 basis points. In this rate environment, investment income should benefit from improving operating cash flow. Management estimates investment income to be $1.45 billion in the third quarter of 2024 and grow thereafter.
Chubb has a strong capital position with sufficient cash-generation capabilities that, in turn, support wealth distribution to shareholders and growth initiatives.
Risks to Chubb
Being a P&C insurer, CB is exposed to catastrophe events, which induce volatility in underwriting profitability and affect the combined ratio. Given the uncertainty surrounding the magnitude of cat loss, higher losses could drain earnings.
Though debt has been increasing since 2017, times interest earned ratio has been improving over the years. Nonetheless, both leverage and times interest earned compare unfavorably with the industry.
CB Shares Expensive
CB shares are trading at a price-to-book multiple of 1.82, higher than the industry average of 1.62
Shares other insurers like The Travelers Companies (TRV - Free Report) and The Allstate Corporation (ALL - Free Report) are trading at a multiple higher than the industry average.
Parting Thoughts
Chubb’s market-leading position, strategic initiatives, solid capital position and better return on capital pave the way for long-term growth. The insurer’s dividend history is impressive. It has increased dividends for 31 straight years. CB has a dividend yield of 1.3%, better than the industry average of 0.3%.
Investors who already hold CB stock should retain it, and new investors can wait for a better entry point as this insurance behemoth is unlikely to disappoint.
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Chubb Stock Trading Near 52-Week High: What Should Investors Know?
Shares of Chubb Limited (CB - Free Report) closed at $290.58 on Thursday, near its 52-week high of $294.18. A compelling portfolio, strong renewal retention, positive rate increases, strategic initiatives to fuel profitability and a solid capital position are driving the price higher.
Chubb is one of the world’s largest providers of property and casualty (P&C) insurance and reinsurance and the largest publicly traded P&C insurer based on a market capitalization of $117.4 billion. Earnings grew 19.4% in the last five years, better than the industry average of 10.5%. The expected long-term earnings growth rate is 2.4%. The Zacks Consensus Estimate for 2024 has moved 1.1% north in the past 60 days, reflecting investor optimism.
Shares have rallied 28.6% year to date, in line with the industry’s increase and outperforming the Finance sector’s increase of 15.3% and the S&P 500 composite’s rise of 19.8%.
CB vs Industry, Sector, S&P 500 YTD
Image Source: Zacks Investment Research
CB shares are trading well above the 50-day moving average, indicating a bullish trend.
CB’s Return on Capital
Return on equity in the trailing 12 months was 15.8%, better than the industry average of 8%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.
Also, return on invested capital (ROIC) has been increasing over the last few quarters amid capital investments made over the same time frame. This reflects CB’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 10.3%, better than the industry average of 6%.
Factors Favoring CB?
Chubb is poised for long-term growth as it capitalizes on the potential of middle-market businesses (both domestic and international) as well as enhances traditional core packages and specialty products. The insurer is also making strategic investments in various initiatives that will accelerate growth.
Chubb pursues strategic mergers and acquisitions to diversify its portfolio, add capabilities and synergies and expand its geographic footprint. Acquisitions have also improved premium revenues, the major component of the insurer’s top line. Premiums should also benefit from commercial P&C rate increases, new business and strong renewal retention.
The Fed recently cut interest rate by 50 basis points. In this rate environment, investment income should benefit from improving operating cash flow. Management estimates investment income to be $1.45 billion in the third quarter of 2024 and grow thereafter.
Chubb has a strong capital position with sufficient cash-generation capabilities that, in turn, support wealth distribution to shareholders and growth initiatives.
Risks to Chubb
Being a P&C insurer, CB is exposed to catastrophe events, which induce volatility in underwriting profitability and affect the combined ratio. Given the uncertainty surrounding the magnitude of cat loss, higher losses could drain earnings.
Though debt has been increasing since 2017, times interest earned ratio has been improving over the years. Nonetheless, both leverage and times interest earned compare unfavorably with the industry.
CB Shares Expensive
CB shares are trading at a price-to-book multiple of 1.82, higher than the industry average of 1.62
Shares other insurers like The Travelers Companies (TRV - Free Report) and The Allstate Corporation (ALL - Free Report) are trading at a multiple higher than the industry average.
Parting Thoughts
Chubb’s market-leading position, strategic initiatives, solid capital position and better return on capital pave the way for long-term growth. The insurer’s dividend history is impressive. It has increased dividends for 31 straight years. CB has a dividend yield of 1.3%, better than the industry average of 0.3%.
However, given a premium valuation, unfavorable leverage and times interest earned, it is better to adopt a cautious stance for this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Investors who already hold CB stock should retain it, and new investors can wait for a better entry point as this insurance behemoth is unlikely to disappoint.