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RISK CONCERN
Investment Strategy, Risk Analysis, and Insights by Chartered Professionals
The Hanover Insurance Group, Inc. (XNYS:THG) In-Depth Stock/Fundamental/Options Analysis Today
Primary Facts
THG
Name:
THE HANOVER INSURANCE GROUP, INC. (XNYS:THG)
Sector:
195.20M
Industry:
Insurance�Property & Casualty
CEO:
Mr. John Roche
Total Employees:
4,400
Our Technological Advancement Rating
Our Rating:
-
-
ANALYSIS OF ALL CRITICAL FACTORS & RISKS RELATED TO THE STOCK & FUNDAMENTAL/LONG-TERM ANALYSIS OF THE HANOVER INSURANCE GROUP, INC.(THG) AS PER DATA ANALYSIS OF LAST 3 YEARS AND COMPARISON WITH COMPETITORS/PEERS, AND INSURANCE�PROPERTY & CASUALTY INDUSTRY. DATE: 07/09/2022
Primary Targets/Price Insights
Previous Close ($) :
128.95
One Month Price Target:
$129.48
Six Month Price Target :
$132.11
Likely Price in One Year's Time:
Ticker:
$135.26
Likely Trading Range Today Under (Normal Volatility)
$128.52
Price Upper limit ($) :
$129.41
Price Lower limit ($) :
Crash Risk Prep/Key Price Levels (High Volatility/Risk)
Price, as per data analysis, isn't likely to fall below:
Today:
$123.6
This week:
$116.98
This month :
$105.
Other Primary facts
Market Cap:
4.59B
Market Cap Classification:
Mid Cap
Number of Shares
IPO Date:
35.63M
Best/Worst Daily Performance (Last 3+ Years)
Highest Daily Appreciation:
9.32%
-15.35%
Worst Daily Decline:
Our Options Trading Entry Points
Iron Condor entry points for options expiring in 1 week's time
Low risk (<2%) entry points
Buy Call:
Sell Call:
Buy Put:
Sell Put:
$153.81
$142.48
$104.09
$115.42
Medium risk (<10%) entry points
Buy Call
Sell Call
$138.79
Buy Put:
Sell Put:
$136.37
$119.08
$121.53
These entry points can be used for other strategies, such as butterflies, straddles, etc.
Risk-Adjusted returns (Sharpe Ratio) of
THG
Sharpe Ratio:
0.09%
Comparison:
THG, is amongst the top 40% stocks with lowest risk-adjusted returns
Sharpe ratio is -93.83% lower than the industry
& is -96.26% lower than the market/S&P 500 average
Average Returns/Yield of
THG
Daily returns:
0.01%
Weekly returns:
0.05%
Monthly returns:
0.21%
Yearly returns:
10.43%
Comparison of returns:
Average annual returns/yield (last 3 years) is -75.65% below industry average
Classification:
THG, is amongst the top 40% lowest yielding stocks in terms of daily returns
Results of T-Test of Returns:
0.41
Statistical test of Returns:
THG has yielded returns statistically similar to the market
Volatility (measured by Standard Deviation)
Daily Volatility:
2.03%
Weekly Volatility:
4.53%
Monthly Volatility:
9.07%
Yearly Volatility:
31.40%
Volitlilty of last five days (Measured by Standard Deviation)
Average Volatility of this Week:
0.54%
Volatility in last five trading days has been -73.56% below long-term volatility
Value at Risk Analysis (VaR)
Daily VaR:
-4.15%
Weekly VaR:
-9.29%
Monthly VaR:
-18.57%
How Much Can the price of
THG
Decline in a Recession?
Likely price decline in a recession:
Base case (decline):
-16%
Worst case (decline):
-64.33%
This translates to price declining to:
$107.92
This translates to price declining to:
$45.99
Severe Crash Probability
Risk of crash in next 6/12 months: Low (<25%)
What is Value at Risk (VaR)?
Risk Fundamentals
THG is a 31.08% riskier investment compared to the market/S&P 500 & is 12.29% riskier than Nasdaq (IXIC)
Risk (measured by volatility) is -15.81% below industry average
Overall, it is amongst the top 50% most risky stocks
Beta Examination of
THG
Beta in relation to market/S&P 500--0.73
Expected beta in 1 year's time:
0.671
Expected beta in 3 year's time:
0.949
Unlevered (debt free) Beta:
0.596
Beta in relation to Nasdaq (XNAS):
0.581
Beta in relation to all global stocks::
0.722
Beta Comparison & Analysis
Beta of competitors/peers::
1.009
Beta is -27.82% lower than peers
Average Industry Beta:
0.555
Beta is 31.24% above industry average
Sustainable Growth Rate Analysis
Sustainable growth rate for this stock/firm:
13.45%
Sustainable growth rate is 16.72% above industry average
Alpha provided | Alpha Analysis
Alpha provided:
-0.056
Alpha is -261.27% below industry average alpha yield
Alpha is -357% below the market average
Analysis of Cost of Capital of
THG
Equity cost of capital:
0.081
Equity cost of capital is 17.08% above industry mean WACC
Unlevered (without debt) cost of capital:
6.66%
Before-tax cost of debt:
4.35%
After-tax cost of debt:
3.44%
Overall debt rating:
Lower BB medium grade (Fifth highest grade)
Weighted average cost of capital (WACC):
3.44%
WACC is 19.24% above industry mean WACC
Key Per-Share Metrics & Analysis
Revenue per share:
$146.75
Revenue growth rate per share of (3Y):
1.62
Annual revenue growth rate is -65.53% below industry average
EPS:
$11.93
Expected Annual growth rate of EPS (3Y):
1.39%
Expected future EPS growth rate is -91.07% lower than the Insurance�Property & Casualty industry
Free cash flow (FCF) per share:
$24.22
Balance sheet equity growth per share: 21.36%
Equity growth rate per share is -52.76% lower than the industry
Debt per share
$21.94
EBITDA per share
$16.42
Valuation Analysis Today of
THG
P/E Ratio:
14.24
P/E Ratio of Competitors/Peers:
14.67
P/E ratio is -2.93% lower than main peers & is -18.61% lower than the industry
Stock price/value with industry average P/E ratio: $208.74
THG is -38.22% undervalued if valued using industry average P/E ratio
Share value as per dividend discount (DDM) model: $64.32
Present value of the expected future dividends only: $44.95
P/S (Price to Sales ratio):
0.88
Price to sales ratio is -63.37% below the industry mean
P/B (Price to book value ratio):
1.62
Price to free cash flow: 5.33
Price to free cash flow ratio is -59.73% lower than the industry
Net income growth rate (3Y):
20.15%
Net income growth rate is -169.04% lower than the industry average net income growth rate
Dividend Analysis
Dividend payout rate: 6.20%
Dividend yeild: 2.29%
Previous Dividend: $0.75
Previous adjusted dividend: $0.75
Previous Dividend: $2.95
Expected next dividend best case: $0.78
Expected next dividend worst case: $0.72
Average dividend payment (long-term): $0.70
Average dividend increase/decrease (growth rate) % per period: 1.48%
Expected next dividend payment date: 22/09/2022
Expected next dividend record date: 09/08/2022
-
Previous dividend payment date: 24/06/2022
Previous dividend record date: 06/10/2022
-
Dividend History:
2022-06-09--$0.75
2021-12-15--$0.75
2021-06-10--$0.70
2022-03-10--$0.75
2021-09-09--$0.70
2021-03-11--$0.70
Dividend growth rate is -96.79% lower than the industry average
In-depth Debt & Leverage Analysis
Debt to equity ratio:
27.60%
Net debt to equity ratio:
18.00%
Debt to assets ratio:
5.65%
Net debt to assets ratio:
3.68%
Debt-to-asset ratio is -91.51% below industry average
Ability to repay debt:
Interest coverage ratio:
17.21
Interest coverage ratio is 257.31% more than industry average
Looking forward:
Debt growth rate:
0.10%
Annual debt growth is -105% lower than industry average debt growth rate
Debt repayment rate in last quarter: 0.00%
Analysis of Key Statistics
Correlation of price movement with the market:
0.685
Statistical significance of correlation:
THG has a statistically significant correlation with the market
Average Correlation of the industry with the market:
0.6
Stock price is 14.15% more correlated with the market, compared to the industry average correlation
R Squared (percentage of price movement explained by movement of the market):
0.6
Correlation of price movement with Nasdaq (^IXIC):
0.059
Covariance of price movement with the market:
0.07
Kurtosis
8.432
Returns have a significant fat-tails (leptokurtic), i.e., returns considerably higher or lower than the mean returns are more probable, compared to assets with normally distributed returns
Skewness of returns:
-0.735
Returns are left (negative) skewed; mean returns are lower than median and mode returns
Fundamental Analysis & Dupont Analysis of
THG
Gross Profit Margin Ratio:
-
Operating Profit Margin Ratio:
0.00%
-
Net Profit Margin Ratio:
-
Effective Tax Rate:
19.49%
Effective tax rate is -2.48% lower than the industry
Dupont Method
Net Profit Margin
Return on Equity Ratio (ROE):
×
ROA
=
×
15.21%
Return on equity (ROE) is 86.78% higher than the industry
Financial Leverage
Asset Turnover Ratio (ROA):
3.11%
Return on assets (ROA) is 102.99% higher than the industry
Financial Leverage:
1.1x
Current Ratio:
0
-
Cash Conversion Cycle (days):
0
-
The remaining useful life of property plant & equipment is: 48.3 years
Stock based compensation to net income ratio:
1.56%
In-depth Efficiency Analysis
Revenue generated per employee:
1.2M
Each employee generates -1% less revenue than industry average revenue per employee
EBITDA generated per employee:
133.0K
Each employee generates -34% less EBITDA than industry average revenue per employee
Profit generated per employee:
97.9K
Each employee generates -31% less net income/profit than industry average revenue per employee
Free cash flow (FCF) generated per employee:
44.4K
Each employee generates -27% less free cash flow than industry average revenue per employee
Assets/Capital per employee
0.0K
Each employee generates -27% less free cash flow than industry average revenue per employee
Research & Development (R&D) Analysis
-
-
Competitors/Peer firms of
THG
AXIS CAPITAL HOLDINGS LIMITED (XNYS:AXS)
WEBSTER FINANCIAL CORPORATION (XNYS:WBS)
RLI Corp. (XNYS:RLI)
KEMPER CORPORATION (XNYS:KMPR)
CCIV
CINTAS CORPORATION (XFRA:CIT)
LAZARD LTD (XNYS:LAZ)
AXIS CAPITAL HOLDINGS LIMITED (XNYS:AXS)
MGIC INVESTMENT CORPORATION (XNYS:MTG)
Current Analyst Ratings
Strong buy�0%
Buy�8%
Hold�13%
Sell�0%
Strong sell�0%
Overall analyst sentiment is: Hold
Income Statement
Period:
TTM
Date:
3/31/22
Revenue:
5.23B
Cost of Revenue:
Gross Profit:
R&D Expense
General & Admin Expenses:
Selling, General & Admin Expenses
Sales and Marketing Expenses
Other Expenses :
Operating Expenses :
Cost & Expenses :
Interest Income:
Interest Expenses:
Depreciation & Amortization:
EBITDA:
Operating Income:
Other Income Expenses:
Income Before Tax:
Income Tax Expense:
Net Income:
Balance Sheet
Date:
Calendar Year:
Period:
Cash & Cash Equivalents:
Short Term Investments:
Cash & Short Term Investments:
Net Receivables:
Inventory:
Other Current Assets:
Total Current Assets:
PP&E:
Goodwill:
Intangible Assets:
Long Term Investments:
Tax Assets:
Other Non-Current Assets:
Total Non-Current Assets:
Other Assets:
Total Assets:
Accounts Payable:
Short Term Debt:
Tax Payables:
Deferred Revenue:
Other Current Liabilities:
Total Current Liabilities:
Long Term Debt:
Other Non-Current Liabilities:
Total Non Current Liabilities:
Other Liabilities:
Total Liabilities:
Common Stock:
Retained Earnings:
Accumulated Other Comprehensive Loss:
Other Total Stockholders' Equity:
Total Stockholders' Equity:
Total Liabilities and Stockholders' Equity:
Total Investments:
Total Debt:
Net Debt:
-
-
-
-
-
-
-
-
-
34.00M
15.50M
585.00M
-
430.80M
537.20M
104.70M
430.80M
Statement of Cash Flow
Date:
Period:
3.30M
Differed Income Tax :
- 5500.00K
Stock Based Compensation :
6.70M
Change in Working Capital :
- 45700.00K
Accounts Receivables:
- 31700.00K
Other Working Capital:
-
Other Non-Cash Items:
136.50M
Net Cash Provided by Operating Activities:
200.10M
Investments in PP&E:
-
Net Acquisitions:
-
Purchases of Investments:
- 411400.00K
Sales/Maturities of Investments:
Other Investing Activities:
Net Cash Used for Investing Activities:
Debt Repayment:
Common Stock Issued:
Common Stock Repurchased:
Dividend Paid:
Other Financing Activities:
Net Cash Used Provided by Financing Activities:
Effect of FOREX on Changes in Cash:
Net Changes in Cash:
Cash at End of Period:
Cash at Beginning of Period:
Operating Cash Flow:
Capital Expenditure:
Free Cash Flow (FCF):
3/31/22
2022
Q1
272.00M
-
272.00M
3.42B
-
-
-
-
178.80M
-
7.99B
-
-
-
13.85B
13.85B
70.10M
-
769.70M
-
-
-
781.80M
-
781.80M
11.80B
11.01B
600.00K
3.06B
- 256600.0K
27.80M
March 31, 2022 at 6:00:00 AM
4.69B
2.83B
13.85B
8.78B
781.80M
509.8M
304.10M
- 4900.00K
- 112200.00K
-
-
- 16300.00K
- 26700.00K
- 3800.00K
- 46800.00K
-
41.10M
272.00M
230.90M
200.10M
- 4900.00K
195.20M
Our Proprietary Portfolio Rating
Our Rating:
-
Price Forecast/Expected Price in Next 5 Years of
THG
2023
2024
2025
2026
2027
$171.97
$180.39
$189.22
$198.48
$208.20