3 Reasons Investors Love Erie Indemnity (ERIE)

Over the past six months, Erie Indemnity’s shares (currently trading at $341) have posted a disappointing 15.9% loss, well below the S&P 500’s 4.5% gain. This was partly due to its softer quarterly results and might have investors contemplating their next move.

Given the weaker price action, is now a good time to buy ERIE? Find out in our full research report, it’s free.

Why Are We Positive On ERIE?

Operating under a unique business model dating back to 1925, Erie Indemnity (NASDAQ:ERIE) serves as the attorney-in-fact for Erie Insurance Exchange, managing policy issuance, claims handling, and investment services for this reciprocal insurer.

1. Skyrocketing Revenue Shows Strong Momentum

Insurers earn revenue three ways. The core insurance business itself, often called underwriting and represented in the income statement as premiums earned, is one way. Investment income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities is the second way. Fees from various sources such as policy administration, annuities, or other value-added services is the third.

Luckily, Erie Indemnity’s revenue grew at an impressive 11.2% compounded annual growth rate over the last four years. Its growth surpassed the average insurance company and shows its offerings resonate with customers.

2. EPS Increasing Steadily

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Erie Indemnity’s full-year EPS grew at a solid 15.1% compounded annual growth rate over the last five years, better than the broader insurance sector.

3. Stellar ROE Showcases Lucrative Growth Opportunities

Return on equity, or ROE, represents the ultimate measure of an insurer's effectiveness, quantifying how well it transforms shareholder investments into profits. Over the long term, insurance companies with robust ROE metrics typically deliver superior shareholder returns through a balanced approach to capital management.

Over the last five years, Erie Indemnity has averaged an ROE of 26.8%, exceptional for a company operating in a sector where the average shakes out around 12.5% and those putting up 20%+ are greatly admired. This shows Erie Indemnity has a strong competitive moat.

Final Judgment

These are just a few reasons why Erie Indemnity ranks near the top of our list. With the recent decline, the stock trades at $341 per share (or a trailing 12-month price-to-sales ratio of 4.7×). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free.

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