Admiral shares too expensive

Shares of motor insurer Admiral are trading at too high a price, on a PER basis, according to Investec analyst Kevin Ryan.

Despite Admiral being highly profitable in an industry that is inherently unprofitable, Ryan believes the laggards must catch up soon.

His note said: “Unusually in our experience, Admiral’s 3Q 2011 profit warning has not (yet) been followed by further warnings as reserves are topped up.

This is all the more remarkable given that the company has grown by 21 percent compound in the last five years.

“Admiral believes it now has an 11 percent market share of the UK personal motor market which probably makes it the second largest provider after Direct Line. It is likely to be much more difficult to grow profitably from this level, we believe.”