It's been a great afternoon session for Lincoln National investors, who saw their shares rise 2.0% to a price of $24.22 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
Trades Below Its Graham Number but Has an Elevated P/E Ratio:
Lincoln National Corporation, through its subsidiaries, operates multiple insurance and retirement businesses in the United States. The company belongs to the Finance sector, which has an average price to earnings (P/E) ratio of 12.38 and an average price to book (P/B) ratio of 1.58. In contrast, Lincoln National has a trailing 12 month P/E ratio of -1.8 and a P/B ratio of 1.86.
When we divideLincoln National's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.54, 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 Company Trades Below Its Net Current Asset Value:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $16,424 | $17,258 | $17,439 | $17,715 | $18,810 | $14,787 |
| Revenue Growth | n/a | 5.08% | 1.05% | 1.58% | 6.18% | -21.39% |
| Interest Income (MM) | $297 | $326 | $284 | $277 | $283 | $329 |
| Operating Margins | 11% | 5% | 2% | 26% | 9% | 3% |
| Net Margins | 10% | 5% | 3% | 21% | 7% | 9% |
| Net Income (MM) | $1,641 | $886 | $499 | $3,778 | $1,358 | $1,295 |
| Earnings Per Share | $7.4 | $4.38 | $2.56 | $19.96 | $7.78 | $7.09 |
| EPS Growth | n/a | -40.81% | -41.55% | 679.69% | -61.02% | -8.87% |
| Diluted Shares (MM) | 220 | 202 | 194 | 189 | 173 | 164 |
| Free Cash Flow (MM) | $1,943 | -$2,686 | $534 | -$217 | $3,609 | $388 |
| Long Term Debt (MM) | $281,998 | $310,661 | $335,820 | $363,505 | $320,692 | $335,212 |
Lincoln National has weak revenue growth and no capital expenditures, average net margins with a negative growth trend, and flat EPS growth. In addition, we note irregular cash flows. Furthermore, the firm has high levels of debt.
