We've been asking ourselves recently if the market has placed a fair valuation on Globe Life. 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.
Globe Life's Valuation Is in Line With Its Sector Averages:
Globe Life Inc., through its subsidiaries, provides various life and supplemental health insurance products, and annuities to lower middle to middle income households in the United States. 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, Globe Life has a trailing 12 month P/E ratio of 14.9 and a P/B ratio of 2.75.
When we divideGlobe Life's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.71, 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.
EPS Trend Sustained Primarily by Reducing the Number of Shares Outstanding:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $4,528 | $4,738 | $5,113 | $5,215 |
| Interest Income (MM) | -$84 | -$87 | -$83 | -$90 |
| Net Margins | 16.8% | 15.45% | 14.57% | 14.18% |
| Net Income (MM) | $761 | $732 | $745 | $740 |
| Earnings Per Share | $6.83 | $6.82 | $7.22 | $7.42 |
| EPS Growth | n/a | -0.15% | 5.87% | 2.77% |
| Diluted Shares (MM) | 111 | 107 | 103 | 96 |
| Free Cash Flow (MM) | $1,322 | $1,435 | $1,399 | $1,394 |
| Capital Expenditures (MM) | -$42 | -$42 | -$38 | -$28 |
| Long Term Debt (MM) | $1,349 | $1,668 | $1,546 | $1,628 |
| LT Debt to Equity | 0.18 | 0.19 | 0.18 | 0.33 |
Globe Life has strong net margins with a stable trend and a steady stream of strong cash flows. Additionally, the company's financial statements display low debt levels and growing revenues and decreasing reinvestment in the business. However, the firm has EPS growth acheived by reducing the number of outstanding shares.
