Admiral: Stock Cheapest Since March 2020 Even As U.K. Motor Cycle Turns
(Preview) Company Update (ADM LN) (Buy)
Summary
Admiral shares have fallen 43% from their peak to their lowest since March 2020, with a 14.1x P/E and a 6.7% Dividend Yield.
The pricing cycle in U.K. motor insurance has started to turn, albeit unevenly and with price increases lagging claim cost inflation.
We expect price increases to accelerate and benefit Admiral. In the meantime, competitors have flat or declining market shares.
Earnings should be resilient against recessions and inflation, and higher interest rates will benefit Admiral's Investment Income.
With shares at 2,103p, we expect an exit price of 3,544p and a total return of 97% (23.0% annualised) by 2025 year-end. Buy.
Introduction
We revisit our Admiral Group PLC investment case after shares fell to their lowest level since March 2020.
Admiral’s share price has now fallen by 43.3% since their peak in August 2021. Compared to October 2020, when we upgraded our rating to Buy, shares have lost 10.5% (in GBP and after dividends).
We believe sector developments have been po…