Selective Insurance

Selective Insurance Group Inc earns a 3-star quantitative star rating, indicating our belief that this share class is a balanced choice, but prudent investors should consider looking elsewhere. The stock currently trades at a price consistent with our quantitative fair value estimate, which has a medium uncertainty rating.

The company's profitability increases our estimated fair value. Highly profitable companies are often more resilient in recessions and are likely to generate stronger future cash flows for shareholders. For example, the firm's earnings yield of 9.3% sits in the top 30% compared with peers globally. This suggests that it is generating substantial earnings relative to its share price, which contributes to our balanced fair value estimate.

The firm's valuation metrics are an additional encouraging factor. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. The firm's book value yield of 67.9%, for example, falls in the top 45% compared with global peers. The market price is low relative to the book (accounting) value of the company's equity, which further promotes our neutral price/fair value ratio.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has outperformed the broader universe over the past year. While we believe the stock is fairly-valued, this outperformance had a negative impact on our valuation estimate.

The company's quantitative economic moat rating of none suggests any excess returns could erode quickly as competition arrives. However, its financial health score is strong, suggesting that the company should be well positioned to weather tough times.