A question from Yahoo! Answers:
Is the insurance holding company, Progressive, (ticker:PGR) a buyout or takeover candidate?
Recently, after being a flat to down performer over the prior 12-18 months, Pgr announced an extraordinary dividend of $2/share and an additional 100 million share buyback plan. This will add shareholder value, and most likely attract new shareholders to their stock. Still, could this attract a buyout offer in this time of consolidation in other industries.
Based on financials alone, no. The company generated about $1.5 billion in free cash flow in the last 12 months. Divide it by market capitalization ($17.5 billion), and you get a yield (8.5%) that is barely above the prime rate (8.25%). Good buyout candidates have cash flow yields far in excess of the prime rate. Alternatively, they can have substantial surplus assets, but to figure out whether Progressive has any is impossible without some deep digging…