We came across one bullish thesis at The Progressive Corporation on CompoundingLab’s Substack. In this article, we will summarize the bulls thesis on PGR. Progressive Corporation stock traded at $205.54 on February 4. PGR’s trailing and forward P/E were 10.45 and 12.56, respectively, according to Yahoo Finance.

The Progressive Corporation operates as an insurance company in the United States. PGR appears undervalued, and presents an attractive investment opportunity with significant upside potential. Based on a dividend discount model, contrasted with a terminal P/E multiple, the stock looks about 25% below fair value, implying an expected annual alpha of about 10% if it converges to fair value over the next three years.

The investment case is supported by Progressive’s strong fundamentals, which include a long-term EPS growth assumption of 4%, a structurally high ROE of 32% and a reasonable cost of net capital of 6.5%, with an exit P/E multiple of 14.8x. Progressive is the second-largest U.S. auto insurer by market share, trailing only private competitor State Farm, and has the highest 10-year average ROA among listed property and casualty insurers at 5.68%.

Its core competitive advantage lies in data-driven underwriting and pricing at an unmatched scale, which continues to support solid profitability even after a recent EPS failure. Sensitivity analysis indicates that across a wide range of reasonable assumptions, the stock remains undervalued, even with conservative scenarios suggesting a 6% annual alpha, highlighting the low downside risk. This combination of structural profitability, durable moat and favorable valuation underpins a high-confidence investment thesis.

Given the current price, initiating a position now offers both an attractive entry point and the potential for incremental gains as the market recognizes Progressive’s intrinsic value, with the option to scale the position on weakness. Overall, Progressive represents a high-quality, undervalued insurer with consistent growth, exceptional capital returns and a rare risk/reward profile among large-cap P&C stocks.

Previously, we covered a bullish thesis to Charly AI’s The Progressive Corporation (PGR) in April 2025, which highlighted the company’s strong financial performance, improving profit margins, technological innovation and undervaluation based on discounted cash flow analysis. PGR’s share price has depreciated by 21.06% since our coverage. CompoundingLab shares a similar outlook, but emphasizes a valuation-driven approach, highlighting a 25% undervaluation and 10% annual alpha potential over the next three years.