Donegal Group Inc Stock Upgraded (DGICA)

NEW YORK ( TheStreet) -- Donegal Group (Nasdaq: DGICA) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, increase in net income and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.

Highlights from the ratings report include:
  • DGICA's revenue growth has slightly outpaced the industry average of 5.0%. Since the same quarter one year prior, revenues rose by 11.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • DGICA's debt-to-equity ratio is very low at 0.19 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Insurance industry. The net income increased by 263.1% when compared to the same quarter one year prior, rising from $2.21 million to $8.01 million.
  • After a year of stock price fluctuations, the net result is that DGICA's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
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Donegal Group Inc., through its subsidiaries, provides personal and commercial lines of property and casualty insurance to businesses and individuals in the United States. The company has a P/E ratio of 673.5, above the average insurance industry P/E ratio of 662.5 and above the S&P 500 P/E ratio of 17.7. Donegal Group has a market cap of $265 million and is part of the financial sector and insurance industry. Shares are down 3.2% year to date as of the close of trading on Thursday.

You can view the full Donegal Group Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet RatingsStaff
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