Morgan Stanley Sees Improving PIF, Lackluster EPS Growth for The Progressive Corporation

In a report published Thursday, Morgan Stanley analyst Kai Pan reiterated an Underweight rating on

. In the report, Morgan Stanley noted, “PGR is a pure play in personal auto with a large footprint in the fast growing direct segment. At 16x 2014e EPS and 2.2x Book, PGR's premium valuation implies superior EPS growth & returns. However, PGR EPS growth has been lackluster the last 3/5/10 years while ROE has declined from 20%+ to 14%. Increasing price competition in personal auto marketplace and limited EPS growth trajectory in 2014‐15 underpin our Underweight recommendation. Our base case is $23 (2x 1Q15e BV, 15x 2014 EPS) offering a risk‐return skewed to the downside.” The Progressive Corporation closed on Wednesday at $24.06.