Assurant has had an impressive run over the past six months as its shares have beaten the S&P 500 by 14.9%. The stock now trades at $281.22, marking a 28% gain. This was partly due to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is there a buying opportunity in Assurant, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Assurant Not Exciting?
We’re glad investors have benefited from the price increase, but we’re passing on Assurant for now. Here are three reasons why AIZ doesn’t excite us, plus one stock we’d rather own.
1. Net Premiums Earned Point to Soft Demand
Net premiums earned are net of what’s paid to reinsurers (insurance for insurance companies), which are used by insurers to protect themselves from large losses.
Assurant’s net premiums earned has grown at a 5.2% annualized rate over the last five years, worse than the broader insurance industry and slower than its total revenue.
2. Recent EPS Growth Below Our Standards
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Assurant’s EPS grew at an unimpressive 15.6% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 7.9% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
3. BVPS Growth Demonstrates Strong Asset Foundation
We consider book value per share (BVPS) a critical metric for insurance companies. BVPS represents the total net worth per share, providing insight into a company’s financial strength and ability to meet policyholder obligations.
Although Assurant’s BVPS increased by a meager 4.4% annually over the last five years, the good news is that its growth has recently accelerated as BVPS grew at a decent 13.1% annual clip over the past two years (from $96.53 to $123.48 per share).
Final Judgment
Assurant isn’t a terrible business, but it doesn’t pass our bar. With its shares topping the market in recent months, the stock trades at 2.2× forward P/B (or $281.22 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We’re pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at the most dominant software business in the world.
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