Should You Buy This Stock After Its Recent Pullback?

For most of the past year, the share price of automotive insurer Progressive (NYSE: PGR) has been trending lower. Then, late last year, this hard-hit stock showed some signs of a recovery. Unfortunately, after encountering resistance during December, Progressive stock returned to a downward trajectory at the start of the year and continues tumbling to new multiyear lows.

There are substantive reasons why investors continue to lose confidence in the venerable insurance company, which help explain why these investors have bailed rather than held on to positions during this rough patch.

To be clear, an opportunity could emerge here for Progressive investors down the road. Today, however, taking one's time may remain the better move.

Progressive and its continued stock price slump

Over the past year, Progressive's share price fell about 14%. For comparison, the S&P 500 index is up 19.4%. Again, it's not a mystery why this stock has fallen, and continues to fall, out of favor with investors.

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Since the beginning of 2025, Progressive has reported a steady slowdown in revenue growth. The company publishes preliminary results on a monthly basis, and investors have been able to see this trend play out with little time lag.

For instance, in January 2025, Progressive reported an 18% year-over-year increase in net premiums written and a 22% increase in net premiums earned. According to Progressive's latest monthly financials for November, growth in net premiums written and earned is coming in at 11% and 14%, respectively.

At the same time, increased competition is softening Progressive's pricing advantages. Throw in the increased costs to repair damaged vehicles these days, and it's easy to see why the slump has persisted. Sell-side analysts continue to anticipate an earnings decline next year, with average forecasts calling for earnings per share (EPS) to fall by well over 10%.

Cheaper than before, but still too early to buy

With the share price drop, you may be wondering whether Progressive, previously perceived as one of the highest-quality auto insurance stocks, has fallen to a bargain basement valuation. Currently, shares trade for just under 13 times forward earnings. Compared to S&P 500 stocks as a whole, that may sound inexpensive, but that's hardly a bargain basement valuation for a property & casualty insurance stock.

Some automotive-focused insurance stocks, like Mercury General, have similar valuations, while others, such as Allstate, trade at forward price-to-earnings (P/E) ratios in the single digits.

In short, Progressive's valuation does not quite yet account for the near-term uncertainty surrounding the company's finances. This is why investors have little reason to buy now and ride out the current troubles. Progressive's dividend policy may be another reason. Progressive pays out a small, $0.10 per share quarterly dividend, along with an annual special dividend. The latest of these special dividends came out to $13.75 per share.

However, this special dividend varies widely. In some years, like 2022 or 2023, Progressive didn't pay a special dividend at all. Buying the dip thus far has proven unprofitable and disappointing. Consider waiting for either lower prices or the emergence of more promising news, such as any reported reversal in current growth and profitability trends.

Thomas Niel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Progressive. The Motley Fool has a disclosure policy.