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Travelers’ stock (NYSE: TRV) has seen strong gains this year, outperforming the S&P500 index by 3%. However, the stock price recently dropped by 7.4% after the company reported lower-than-expected earnings for the first quarter of 2024. Despite this, the stock is still trading below its estimated fair value of $228 per share.

Over the past three years, TRV has increased in value by 45%, compared to a 35% increase in the S&P 500. Despite this growth, TRV has struggled to consistently beat the market, with returns of 11% in 2021, 20% in 2022, and 2% in 2023. In comparison, the S&P 500 saw returns of 27% in 2021, -19% in 2022, and 24% in 2023. The Trefis High Quality Portfolio, consisting of 30 stocks, has consistently outperformed the S&P 500 in the same period, showing better returns with less risk.

In the first quarter of 2024, Travelers reported total revenues of $11.2 billion, up 16% year-over-year. This growth was driven by a 14% increase in premiums and a 28% rise in net investment income. The company’s net income also improved by 15% year-over-year to $1.1 billion in the quarter. In FY 2023, Travelers’ top line grew by 12% to $41.3 billion, with an increase in net written premiums and NII. However, total expenses as a percentage of revenues also increased.

Looking ahead, Travelers is expected to see further improvement in its net income margin in the second quarter. The company’s revenues are forecasted to reach $44.5 billion in FY 2024, with an adjusted net income of $4.06 per share. With a GAAP EPS of $18.11 and a P/E multiple of just below 13x, the stock is expected to reach a valuation of $228.

Overall, while Travelers has seen strong gains in recent years, it has struggled to consistently beat the market. The company’s recent drop in stock price following lower-than-expected earnings highlights the challenges it may face in a volatile macroeconomic environment. However, with a focus on improving net income and revenue growth, Travelers remains optimistic about its future performance and potential to outperform the market. Investors will be watching closely to see if the company can sustain its growth trajectory and deliver strong returns in the coming months.

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