Intrinsic value of Progressive Corp - PGR

Previous Close

$46.91

  Intrinsic Value

$116.32

stock screener

  Rating & Target

str. buy

+148%

  Value-price divergence*

+15%

Previous close

$46.91

 
Intrinsic value

$116.32

 
Up/down potential

+148%

 
Rating

str. buy

 
Value-price divergence*

+15%

Our model is not good at valuating stocks of financial companies, such as PGR.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of PGR stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 27.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  12.42
  13.70
  12.83
  12.05
  11.34
  10.71
  10.14
  9.62
  9.16
  8.75
  8.37
  8.03
  7.73
  7.46
  7.21
  6.99
  6.79
  6.61
  6.45
  6.31
  6.18
  6.06
  5.95
  5.86
  5.77
  5.69
  5.62
  5.56
  5.51
  5.46
  5.41
Revenue, $m
  0
  26,627
  30,044
  33,663
  37,481
  41,495
  45,701
  50,099
  54,689
  59,472
  64,450
  69,627
  75,009
  80,603
  86,416
  92,456
  98,735
  105,264
  112,054
  119,120
  126,476
  134,138
  142,122
  150,445
  159,128
  168,188
  177,648
  187,529
  197,854
  208,648
  219,935
Variable operating expenses, $m
 
  24,012
  27,087
  30,344
  33,781
  37,394
  41,180
  45,138
  49,269
  53,574
  58,055
  62,670
  67,515
  72,549
  77,781
  83,218
  88,870
  94,746
  100,858
  107,218
  113,839
  120,735
  127,921
  135,413
  143,228
  151,383
  159,898
  168,792
  178,085
  187,800
  197,960
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  21,807
  24,012
  27,087
  30,344
  33,781
  37,394
  41,180
  45,138
  49,269
  53,574
  58,055
  62,670
  67,515
  72,549
  77,781
  83,218
  88,870
  94,746
  100,858
  107,218
  113,839
  120,735
  127,921
  135,413
  143,228
  151,383
  159,898
  168,792
  178,085
  187,800
  197,960
Operating income, $m
  1,612
  2,616
  2,957
  3,319
  3,700
  4,101
  4,521
  4,961
  5,419
  5,897
  6,395
  6,957
  7,495
  8,054
  8,634
  9,238
  9,865
  10,518
  11,196
  11,902
  12,637
  13,403
  14,200
  15,032
  15,900
  16,805
  17,750
  18,737
  19,769
  20,848
  21,975
EBITDA, $m
  1,811
  2,835
  3,199
  3,585
  3,991
  4,419
  4,867
  5,335
  5,824
  6,333
  6,863
  7,414
  7,987
  8,583
  9,202
  9,845
  10,514
  11,209
  11,932
  12,685
  13,468
  14,284
  15,134
  16,020
  16,945
  17,910
  18,917
  19,969
  21,069
  22,218
  23,420
Interest expense (income), $m
  134
  145
  305
  475
  656
  847
  1,048
  1,258
  1,478
  1,708
  1,947
  2,196
  2,455
  2,724
  3,004
  3,294
  3,596
  3,910
  4,237
  4,576
  4,929
  5,297
  5,680
  6,080
  6,496
  6,930
  7,383
  7,856
  8,350
  8,866
  9,406
Earnings before tax, $m
  1,471
  2,471
  2,652
  2,843
  3,044
  3,254
  3,473
  3,703
  3,941
  4,190
  4,448
  4,761
  5,040
  5,330
  5,631
  5,944
  6,269
  6,607
  6,960
  7,326
  7,708
  8,105
  8,520
  8,952
  9,404
  9,875
  10,367
  10,881
  11,419
  11,981
  12,569
Tax expense, $m
  414
  667
  716
  768
  822
  879
  938
  1,000
  1,064
  1,131
  1,201
  1,286
  1,361
  1,439
  1,520
  1,605
  1,693
  1,784
  1,879
  1,978
  2,081
  2,188
  2,300
  2,417
  2,539
  2,666
  2,799
  2,938
  3,083
  3,235
  3,394
Net income, $m
  1,031
  1,804
  1,936
  2,076
  2,222
  2,375
  2,536
  2,703
  2,877
  3,058
  3,247
  3,476
  3,679
  3,891
  4,111
  4,339
  4,576
  4,823
  5,080
  5,348
  5,627
  5,917
  6,220
  6,535
  6,865
  7,209
  7,568
  7,943
  8,336
  8,746
  9,176

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  33,428
  37,985
  42,858
  48,021
  53,468
  59,194
  65,194
  71,468
  78,016
  84,838
  91,940
  99,325
  107,004
  114,983
  123,275
  131,892
  140,849
  150,162
  159,849
  169,929
  180,422
  191,352
  202,741
  214,615
  227,001
  239,926
  253,421
  267,517
  282,246
  297,643
  313,745
Adjusted assets (=assets-cash), $m
  33,428
  37,985
  42,858
  48,021
  53,468
  59,194
  65,194
  71,468
  78,016
  84,838
  91,940
  99,325
  107,004
  114,983
  123,275
  131,892
  140,849
  150,162
  159,849
  169,929
  180,422
  191,352
  202,741
  214,615
  227,001
  239,926
  253,421
  267,517
  282,246
  297,643
  313,745
Revenue / Adjusted assets
  0.000
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
  0.701
Average production assets, $m
  1,572
  1,784
  2,013
  2,255
  2,511
  2,780
  3,062
  3,357
  3,664
  3,985
  4,318
  4,665
  5,026
  5,400
  5,790
  6,195
  6,615
  7,053
  7,508
  7,981
  8,474
  8,987
  9,522
  10,080
  10,662
  11,269
  11,902
  12,564
  13,256
  13,979
  14,736
Working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total debt, $m
  3,148
  6,621
  10,335
  14,269
  18,420
  22,783
  27,355
  32,136
  37,125
  42,324
  47,735
  53,363
  59,214
  65,294
  71,612
  78,179
  85,004
  92,101
  99,482
  107,163
  115,159
  123,487
  132,166
  141,214
  150,652
  160,501
  170,784
  181,525
  192,748
  204,481
  216,751
Total liabilities, $m
  25,470
  28,944
  32,658
  36,592
  40,743
  45,106
  49,678
  54,459
  59,448
  64,647
  70,058
  75,686
  81,537
  87,617
  93,935
  100,502
  107,327
  114,424
  121,805
  129,486
  137,482
  145,810
  154,489
  163,537
  172,975
  182,824
  193,107
  203,848
  215,071
  226,804
  239,074
Total equity, $m
  7,957
  9,040
  10,200
  11,429
  12,725
  14,088
  15,516
  17,009
  18,568
  20,191
  21,882
  23,639
  25,467
  27,366
  29,339
  31,390
  33,522
  35,739
  38,044
  40,443
  42,941
  45,542
  48,252
  51,078
  54,026
  57,102
  60,314
  63,669
  67,174
  70,839
  74,671
Total liabilities and equity, $m
  33,427
  37,984
  42,858
  48,021
  53,468
  59,194
  65,194
  71,468
  78,016
  84,838
  91,940
  99,325
  107,004
  114,983
  123,274
  131,892
  140,849
  150,163
  159,849
  169,929
  180,423
  191,352
  202,741
  214,615
  227,001
  239,926
  253,421
  267,517
  282,245
  297,643
  313,745
Debt-to-equity ratio
  0.396
  0.730
  1.010
  1.250
  1.450
  1.620
  1.760
  1.890
  2.000
  2.100
  2.180
  2.260
  2.330
  2.390
  2.440
  2.490
  2.540
  2.580
  2.610
  2.650
  2.680
  2.710
  2.740
  2.760
  2.790
  2.810
  2.830
  2.850
  2.870
  2.890
  2.900
Adjusted equity ratio
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238
  0.238

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,031
  1,804
  1,936
  2,076
  2,222
  2,375
  2,536
  2,703
  2,877
  3,058
  3,247
  3,476
  3,679
  3,891
  4,111
  4,339
  4,576
  4,823
  5,080
  5,348
  5,627
  5,917
  6,220
  6,535
  6,865
  7,209
  7,568
  7,943
  8,336
  8,746
  9,176
Depreciation, amort., depletion, $m
  199
  220
  242
  266
  291
  317
  345
  374
  404
  436
  468
  457
  493
  529
  568
  607
  649
  691
  736
  782
  831
  881
  934
  988
  1,045
  1,105
  1,167
  1,232
  1,300
  1,371
  1,445
Funds from operations, $m
  2,671
  2,024
  2,178
  2,342
  2,513
  2,693
  2,881
  3,077
  3,281
  3,494
  3,715
  3,933
  4,172
  4,420
  4,678
  4,946
  5,225
  5,515
  5,816
  6,130
  6,457
  6,798
  7,153
  7,524
  7,910
  8,313
  8,735
  9,175
  9,635
  10,117
  10,620
Change in working capital, $m
  -31
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from operations, $m
  2,702
  2,024
  2,178
  2,342
  2,513
  2,693
  2,881
  3,077
  3,281
  3,494
  3,715
  3,933
  4,172
  4,420
  4,678
  4,946
  5,225
  5,515
  5,816
  6,130
  6,457
  6,798
  7,153
  7,524
  7,910
  8,313
  8,735
  9,175
  9,635
  10,117
  10,620
Maintenance CAPEX, $m
  0
  -154
  -175
  -197
  -221
  -246
  -273
  -300
  -329
  -359
  -391
  -423
  -457
  -493
  -529
  -568
  -607
  -649
  -691
  -736
  -782
  -831
  -881
  -934
  -988
  -1,045
  -1,105
  -1,167
  -1,232
  -1,300
  -1,371
New CAPEX, $m
  -215
  -213
  -229
  -242
  -256
  -269
  -282
  -295
  -308
  -320
  -334
  -347
  -361
  -375
  -389
  -405
  -421
  -437
  -455
  -473
  -493
  -513
  -535
  -558
  -582
  -607
  -634
  -662
  -692
  -723
  -756
Cash from investing activities, $m
  -2,465
  -367
  -404
  -439
  -477
  -515
  -555
  -595
  -637
  -679
  -725
  -770
  -818
  -868
  -918
  -973
  -1,028
  -1,086
  -1,146
  -1,209
  -1,275
  -1,344
  -1,416
  -1,492
  -1,570
  -1,652
  -1,739
  -1,829
  -1,924
  -2,023
  -2,127
Free cash flow, $m
  237
  1,657
  1,775
  1,902
  2,036
  2,178
  2,326
  2,482
  2,645
  2,814
  2,991
  3,163
  3,354
  3,553
  3,759
  3,974
  4,197
  4,429
  4,670
  4,921
  5,182
  5,454
  5,737
  6,032
  6,340
  6,661
  6,996
  7,346
  7,712
  8,094
  8,493
Issuance/(repayment) of debt, $m
  452
  3,473
  3,714
  3,934
  4,150
  4,363
  4,572
  4,781
  4,989
  5,199
  5,411
  5,628
  5,851
  6,080
  6,318
  6,566
  6,825
  7,097
  7,381
  7,681
  7,996
  8,328
  8,679
  9,048
  9,438
  9,849
  10,283
  10,741
  11,224
  11,733
  12,270
Issuance/(repurchase) of shares, $m
  -193
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  269
  3,473
  3,714
  3,934
  4,150
  4,363
  4,572
  4,781
  4,989
  5,199
  5,411
  5,628
  5,851
  6,080
  6,318
  6,566
  6,825
  7,097
  7,381
  7,681
  7,996
  8,328
  8,679
  9,048
  9,438
  9,849
  10,283
  10,741
  11,224
  11,733
  12,270
Total cash flow (excl. dividends), $m
  506
  5,130
  5,488
  5,836
  6,187
  6,540
  6,899
  7,263
  7,634
  8,013
  8,402
  8,791
  9,205
  9,633
  10,078
  10,540
  11,022
  11,526
  12,051
  12,602
  13,178
  13,782
  14,416
  15,080
  15,778
  16,510
  17,279
  18,087
  18,935
  19,827
  20,763
Retained Cash Flow (-), $m
  -668
  -1,083
  -1,160
  -1,229
  -1,296
  -1,363
  -1,428
  -1,493
  -1,558
  -1,624
  -1,690
  -1,758
  -1,827
  -1,899
  -1,973
  -2,051
  -2,132
  -2,217
  -2,305
  -2,399
  -2,497
  -2,601
  -2,711
  -2,826
  -2,948
  -3,076
  -3,212
  -3,355
  -3,506
  -3,665
  -3,832
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  4,047
  4,328
  4,607
  4,890
  5,178
  5,471
  5,770
  6,075
  6,389
  6,712
  7,033
  7,377
  7,734
  8,104
  8,489
  8,891
  9,309
  9,746
  10,203
  10,681
  11,181
  11,705
  12,254
  12,830
  13,434
  14,068
  14,732
  15,430
  16,162
  16,931
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  3,880
  3,962
  4,010
  4,027
  4,013
  3,970
  3,898
  3,797
  3,670
  3,519
  3,340
  3,148
  2,941
  2,721
  2,492
  2,259
  2,025
  1,795
  1,571
  1,357
  1,156
  971
  803
  653
  523
  410
  316
  239
  176
  127
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

The Progressive Corporation, through its subsidiaries, provides personal and commercial property-casualty insurance, and other specialty property-casualty insurance and related services primarily in the United States. Its Personal Lines segment writes insurance for personal autos, and recreational and other vehicles. This segment’s products include personal auto insurance; and special lines products, including insurance for motorcycles, ATVs, RVs, mobile homes, watercraft, and snowmobiles. The company’s Commercial Lines segment provides primary liability, physical damage, and other auto-related insurance for autos, vans, and pick-up trucks, and dump trucks used by small businesses; tractors, trailers, and straight trucks primarily used by regional general freight and expeditor-type businesses, and non-fleet long-haul operators; dump trucks, log trucks, and garbage trucks used by dirt, sand and gravel, logging, and coal-type businesses; tow trucks and wreckers used in towing services and gas/service station businesses; and non-fleet taxis, black-car services, and airport taxis. Its Property segment provides personal and commercial property insurance, personal umbrella insurance, and primary and excess flood insurance products for homeowners, other property owners, and renters. The company also offers policy issuance and claims adjusting services for the commercial auto insurance procedures/plans; home, condominium, and renters insurance; and general liability and business owners policies, and workers’ compensation insurance, as well as sells personal auto physical damage and property damage liability insurance in Australia. The Progressive Corporation sells its products and services through independent insurance agencies, as well as directly on the Internet, mobile devices, and over the phone. The company was founded in 1937 and is headquartered in Mayfield Village, Ohio.

FINANCIAL RATIOS  of  Progressive Corp (PGR)

Valuation Ratios
P/E Ratio 26.4
Price to Sales 1.2
Price to Book 3.4
Price to Tangible Book
Price to Cash Flow 10.1
Price to Free Cash Flow 10.9
Growth Rates
Sales Growth Rate 12.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 64.1%
Cap. Spend. - 3 Yr. Gr. Rate 9%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 39.6%
Total Debt to Equity 39.6%
Interest Coverage 12
Management Effectiveness
Return On Assets 3.6%
Ret/ On Assets - 3 Yr. Avg. 4.6%
Return On Total Capital 9.8%
Ret/ On T. Cap. - 3 Yr. Avg. 12.7%
Return On Equity 13.5%
Return On Equity - 3 Yr. Avg. 17%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 7.7%
EBITDA Margin - 3 Yr. Avg. 9.7%
Operating Margin 6.9%
Oper. Margin - 3 Yr. Avg. 9.1%
Pre-Tax Margin 6.3%
Pre-Tax Margin - 3 Yr. Avg. 8.4%
Net Profit Margin 4.4%
Net Profit Margin - 3 Yr. Avg. 5.7%
Effective Tax Rate 28.1%
Eff/ Tax Rate - 3 Yr. Avg. 31%
Payout Ratio 50.3%

PGR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PGR stock intrinsic value calculation we used $23419 million for the last fiscal year's total revenue generated by Progressive Corp. The default revenue input number comes from 2016 income statement of Progressive Corp. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PGR stock valuation model: a) initial revenue growth rate of 13.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for PGR is calculated based on our internal credit rating of Progressive Corp, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Progressive Corp.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PGR stock the variable cost ratio is equal to 90.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for PGR stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 4.6% for Progressive Corp.

Corporate tax rate of 27% is the nominal tax rate for Progressive Corp. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PGR stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for PGR are equal to 6.7%.

Life of production assets of 10.2 years is the average useful life of capital assets used in Progressive Corp operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PGR is equal to 0%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $7957 million for Progressive Corp - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 584.901 million for Progressive Corp is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Progressive Corp at the current share price and the inputted number of shares is $27.4 billion.

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COMPANY NEWS

▶ Jerome Dodson Comments on Progressive   [Jul-25-17 07:23PM  GuruFocus.com]
▶ Progressive Launches HomeQuote Explorer   [Jul-24-17 02:00PM  PR Newswire]
▶ Progressive Reports June 2017 Results   [08:02AM  GlobeNewswire]
▶ Forget Tesla, Buy These 4 Growth Stocks Instead   [Jul-07-17 12:20PM  Zacks]
▶ ETFs with exposure to Progressive Corp. : June 19, 2017   [Jun-19-17 03:55PM  Capital Cube]
▶ Two members hitting all-time highs   [Jun-15-17 01:23PM  CNBC Videos]
▶ Seven iQ100 members hit all-time highs   [Jun-14-17 03:48PM  CNBC Videos]
▶ Progressive Reports May 2017 Results   [08:39AM  GlobeNewswire]
▶ One member hitting a new all time high   [Jun-13-17 02:44PM  CNBC Videos]
▶ ETFs with exposure to Progressive Corp. : June 9, 2017   [Jun-09-17 01:51PM  Capital Cube]
▶ Stocks To Buy And Watch: Top IPOs, Big And Small Caps, Growth Stocks   [May-18-17 02:38PM  Investor's Business Daily]
▶ Progressive Reports April 2017 Results   [May-17-17 08:35AM  GlobeNewswire]
▶ Progressive Corp. board OKs share buyback program   [May-12-17 04:55PM  MarketWatch]
▶ Progressive misses 1Q profit forecasts   [10:04AM  Associated Press]
▶ Progressive Reports March 2017 Results   [08:32AM  GlobeNewswire]
▶ Auto-insurance underwriting suffers worst year in past 15   [Mar-28-17 05:51PM  at MarketWatch]
▶ 'Hey Google - Let me Talk to Progressive'   [11:00AM  PR Newswire]
▶ [$$] Progressive Stock Can Drive Higher   [07:10AM  at Barrons.com]
▶ Progressive Reports February 2017 Results   [08:40AM  GlobeNewswire]
▶ Insuring Your Portfolio With Insurance Stocks   [Mar-08-17 11:00AM  at Insider Monkey]
Stock chart of PGR Financial statements of PGR Annual reports of PGR
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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