It hasn't been a great evening session for Unum investors, who have watched their shares sink by -2.5% to a price of $48.48. Some of you might be wondering if it's time to buy the dip. If you are considering this, make sure to check the company's fundamentals first to determine if the shares are fairly valued at today's prices.
Unum Has Attractive Multiples and Potentially Undervalued:
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 15.89 and an average price to book (P/B) ratio of 1.76. In contrast, Unum has a trailing 12 month P/E ratio of 7.2 and a P/B ratio of 0.91.
P/E rations can be placed into context by dividing them by the firm's expected 5-year EPS growth rate, which gives us its Price to Earnings Growth (PEG) ratio. Unum's PEG ratio is 1.06, which tells us the company is fairly valued in terms of growth. PEG ratios under 1 are considered an indicator of undervalued growth, but we need to keep in mind that many successful companies with excellent share performance have maintained much higher PEG ratios.
As always, a quantitative approach to a stock should be supplemented with a look at qualitative factors, such as the competence of its management team, quality of its corporate culture, and the wide variety of social and economic factors that can impact the success of its product.
Positive Cash Flows:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $11,598 | $11,999 | $13,162 | $12,008 | $11,984 | $12,386 |
| Interest Income (M) | $167 | $177 | $188 | $185 | $188 | $195 |
| Operating Margins | 5% | 12% | 7% | 9% | 15% | 13% |
| Net Margins | 5% | 9% | 6% | 8% | 12% | 10% |
| Net Income (M) | $523 | $1,100 | $793 | $981 | $1,407 | $1,284 |
| Depreciation & Amort. (M) | $101 | $110 | $114 | $120 | $110 | $109 |
| Diluted Shares (M) | 220 | 210 | 204 | 205 | 202 | 198 |
| Earnings Per Share | $2.38 | $5.24 | $3.89 | $4.79 | $6.96 | $6.5 |
| EPS Growth | n/a | 120.17% | -25.76% | 23.14% | 45.3% | -6.61% |
| Avg. Price | $33.76 | $26.84 | $17.2 | $24.94 | $29.75 | $48.48 |
| P/E Ratio | 14.24 | 5.23 | 4.4 | 5.17 | 4.28 | 7.45 |
| Free Cash Flow (M) | $1,392 | $1,456 | $350 | $1,277 | $1,316 | $1,068 |
| CAPEX (M) | $144 | $151 | $119 | $110 | $102 | $135 |
| EV / EBITDA | 14.19 | 6.03 | 6.16 | 7.14 | 5.02 | 7.35 |
| Total Debt (M) | $2,971 | $3,327 | $3,346 | $3,442 | $3,430 | $3,430 |
| Net Debt / EBITDA | 3.95 | 2.17 | 2.92 | 2.85 | 1.78 | 1.88 |
Unum has strong operating margins with a positive growth rate, low leverage levels, and a strong EPS growth trend. However, the firm has positive cash flows. Finally, we note that Unum has slight revenue growth and a flat capital expenditure trend.
