Cheers, Chris
DFY is now trading at 1.6x times' P/B. In the 1Q, DFY’s net premiums grew 10% to $839M, compared to last year of $765M; combined ratios (loss + expense, lower is better) have gone up to 95% compared to 92% in the same period last year. The balance sheet is strong, with no long-term debt. Based on consensus estimates, sales are expected to grow by 8%-10% in the next few years. Return on Equity (ROE) in the quarter has gone down compared to 9% double-digit trends in previous years. DFY did pay some dividends and did share repurchases, but these are minimal as the company retains most of its earnings for growth. We think this is a good quarter, trading at 1.6x Price/Book, which we think is a cheap valuation. Investors took the stock down a lot on concern of auto underwriting losses, but it recovered nearly all of its record intra-day drop. We think it still looks decent at 15X earnings.