Summary
- While margins have been struggling, Donegal's present valuation means cash, assets and sales are trading on the cheap.
- Over time, sustained earnings growth should follow suit.
- 4%+ dividend should also attract value investors here.
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The significant $1.5 million insider purchase recorded on the 14th of August this year in Donegal Group (DGICA) made us take notice of this stock. Furthermore, this purchase was then followed up by a further smaller purchase by Director Jack lee late last week. The long-term chart explains the insiders' bullishness to an extent. Shares at present seem to be undergoing a bullish symmetrical continuation pattern. We have bullish signals also on the long-term MACD indicator as well as bullish divergences on the RSI momentum indicator.
The insurance holding company which announced its second-quarter earnings numbers at the end of July announced EPS of $0.61 which was a comprehensive bottom-line beat (consensus - $0.27). Although revenues of $198.90 million missed expectations in the quarter, it still came in fractionally ahead of the top-line number in the second quarter of 2019.
Therefore, it must be said that through the teeth of the pandemic, Donegal performed very well as it demonstrated that its online agencies still had the wherewithal to close new business especially in the commercial wing of the business. CEO Kevin Burke stated that the robust results were due to the strong underwriting performance trend present in the firm.
