We've been asking ourselves recently if the market has placed a fair valuation on Unum. Let's dive into some of the fundamental values of this mid-cap Finance company to determine if there might be an opportunity here for value-minded investors.
Unum Is Potentially Undervalued and Trades Below Its Graham Number:
Unum Group, together with its subsidiaries, provides financial protection benefit solutions primarily in the United States, the United Kingdom, Poland, and internationally. The company belongs to the Finance sector, which has an average price to earnings (P/E) ratio of 14.34 and an average price to book (P/B) ratio of 1.57. In contrast, Unum has a trailing 12 month P/E ratio of 6.4 and a P/B ratio of 0.98.
When we divideUnum's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.74, which indicates that the market is undervaluing the company's projected growth (a PEG ratio of 1 indicates a fairly valued company). Your analysis of the stock shouldn't end here. Rather, a good PEG ratio should alert you that it may be worthwhile to take a closer look at the stock.
The Business Runs With Low Leverage Levels:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $11,999 | $13,162 | $12,014 | $11,991 |
| Interest Income (MM) | -$177 | -$188 | -$185 | -$188 |
| Net Margins | 9.17% | 6.02% | 6.86% | 10.96% |
| Net Income (MM) | $1,100 | $793 | $824 | $1,314 |
| Depreciation & Amort. (MM) | -$110 | -$114 | -$120 | -$110 |
| Earnings Per Share | $5.24 | $3.89 | $4.02 | $7.12 |
| EPS Growth | n/a | -25.76% | 3.34% | 77.11% |
| Diluted Shares (MM) | 210 | 204 | 205 | 197 |
| Free Cash Flow (MM) | $1,591 | $478 | $1,277 | $1,316 |
| Capital Expenditures (MM) | -$151 | -$119 | -$110 | -$102 |
| Long Term Debt (MM) | $3,327 | $3,346 | $3,442 | $3,430 |
| Net Debt / EBITDA | 2.18 | 2.49 | n/a | 1.72 |
Unum has low leverage, positive EPS growth, and consistent free cash flow. Furthermore, Unum has stable revenues and decreasing reinvestment in the business and decent net margins with a stable trend.
