How Direct Line Insurance Measures Up As a GARP Investmenthttp://www.fool.com/investing/general/2013/06/17/how-direct-line-insurance-measures-up-as-a-garp-in.aspx Royston Wild
June 17, 2013
LONDON -- A popular way to dig out reasonably priced stocks with robust growth potential is through the "Growth At A Reasonable Price," or GARP, strategy. This theory uses the price-to-earnings to growth (PEG) ratio to show how a share's price weighs up in relation to its near-term growth prospects -- a reading below 1 is generally considered decent value for money.
Today I am looking at Direct Line Insurance Group (LSE: DLG) to see how it measures up.
What are Direct Line Insurance Group's earnings expected to do?
Direct Line was spun off from Royal Bank of Scotland and listed on the London Stock Exchange in October of last year. In its full maiden year as a separate entity in 2013, the firm is expected to punch a double-digit earnings fall before recovering robustly in the following 12-month period.
The predicted loss for the current year results in an invalid PEG rating, although this is forecast to register some way below the value watermark of 1 in 2014. Also, Direct Line's price-to-earnings (P/E) ratio is anticipated to fall below 10 next year, territory that represents decent value for money.
Does Direct Line Insurance Group provide decent value against its rivals?