Financial stocks are still out of favor versus the rest of the equity market. This is an opportunity for an astute investor. AFLAC's revenue base is solid and expanding, despite recent slowing. But, with the economic expansion under way, this company has a lot of potential for its stock to move much higher.
We determine the current worth of Aflac Incorporated using both absolute as well as relative valuation methodologies to arrive at its intrinsic value. In general, an absolute valuation paradigm, as applied to this company, attempts to find the value of Aflac Incorporated based exclusively on its
fundamental and basic
technical indicators. By analyzing Aflac Incorporated's
financials, quarterly and monthly indicators, and related drivers such as
dividends, operating cash flow, and various types of growth rates, we attempt to find the most accurate representation of
Aflac Incorporated's intrinsic value. In some cases, mostly for established, large-cap companies, we also incorporate more traditional valuation methods such as dividend discount, discounted cash flow, or asset-based models. As compared to an absolute model, our relative valuation model uses a comparative analysis of Aflac Incorporated. We calculate exposure to Aflac Incorporated's
market risk, different
technical and
fundamental indicators, relevant financial multiples and ratios, and then
comparing them to Aflac Incorporated's related companies.
Aflac Incorporated Investment Alerts
Aflac investment alerts and warnings help investors to get more proficient at understanding not only critical technical and fundamental signals but also the significant portfolio-centered indicators. These indicators include beta, alpha, and other risk-related measures that will help you in monitoring Aflac Incorporated performance across your portfolios.Please check all
investment alerts for Aflac
Aflac Incorporated Valuation Ratios as Compared to Competition
Our valuation model uses many indicators to compare Aflac value to that of its competitors to determine the firm's financial worth. You can analyze the relationship between different fundamental ratios across Aflac Incorporated competition to find
correlations between indicators driving the intrinsic value of Aflac.
Aflac Incorporated Gross Profit
Aflac Incorporated Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Aflac Incorporated previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Aflac Incorporated Gross Profit growth over the last 10 years. Please check Aflac Incorporated's
gross profit and other
fundamental indicators for more details.
What is driving Aflac Incorporated Investor Appetite?
AFLAC. You have seen their commercials on television many times. They are the commercials with the white duck doing yoga, or doing some other kind of things that white ducks do not normally do. They issue reinsurance as well as the insurance for disability that is advertised with the duck.
Their earnings and other numbers are impressive and steady. My kind of company. I like a steady flow of revenue and earnings. And, I like to pay a discounted rate for those earnings. And, that is exactly where this company falls in to place. Here is the revenue, net profit and earnings-per-share over the past several years for your scrutiny:
2011: 22,171.0 1,964.0 4.21
2012: 25,364.0 2,866.0 6.14
2013: 23,939.0 3,158.0 6.80
2014: 22,728.0 2,951.0 6.54
2015: 20,872.0 2,533.0 5.88
The entire world saw a decline in revenue from 2013 - 2014. I am not giving this company a way out or excuse because of their drop in earnings. But, the decline in revenue was due to the economic landscape more than anything the company was not able to accomplish. The decline was limited, though. Their profit decline was contained as well. But, revenue had continued to decline into 2015. That was turned around for 2016, and will be formalized once their earnings are reported in the next few weeks. The expectation is that the earnings come in a little over $6 per share. In the meantime, the stock is trading just shy of $70 per share, a little more than 11 times earnings. That makes this company a bargain buy and with the economic environment improving there is likely to be some good movement upward in earnings and, by consequence, upward movement in stock price.
First, at the earnings per share ratio, this stock is trading well below average. The average is 15.5 ratio. However, the current stock market is trading above 25. This is an outlier. There is likely to be an adjustment downward in the overall price of equities bringing the price of stocks in line with the averages from the past few decades. This may very well bring the price of AFLAC down to an even lower price-to-earnings ratio presenting an even more compelling reason to pick up the stock.
The economy in the United States is expanding. This will present even more opportunities for this company to increase its revenue. At the same time, being an insurance company, AFLAC has the ability to create more profits given its investment books and its obligations for paying out claims. As the economy expands, AFLAC’s ability to increase its revenue expands with it.
A rising tide lifts all boats is an expression that has been used with investing for some time. The economy of the United States is rising and stocks are heading higher as well. AFLAC will move higher. But, financial companies have moved higher at a slower pace than the rest of the overall market. Remember, the EPS ratio is now above 25 whereas the average is 15. AFLAC, despite being a profitable company with a steady base of revenue, is well below that. In fact, the ratios is less than half. But, as the economy continues to rise, this stock will do the same. And, it has the potential to rise even further as the stock catches up with the rest of the equity market.
Get into this company for your portfolio for a lot of reasons. It is a solid earning company. It has a lot of upward potential with its stock price. And, the rest of the investing world will start to favor the financial sector once again, bringing the ratio for this stock into much more favorable levels.
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David Taylor is a Senior Member of Macroaxis Editorial Board - Sector Analysis. David is a professional writer who writes for multiple investment news outlets. His primary focus is dynamic movements in financial markets and effects of economic volatility on North American industries and sectors. David has many years of experience in financial service industry including working with major banks as a FX trader. In his free time, he does a lot of outdoors type activities including rock climbing, mountain biking, hiking, mountaineering and kayaking in the summer, and snowboarding in the winter.
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