It hasn't been a great morning session for American International investors, who have watched their shares sink by -3.7% to a price of $73.84. 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.
American International Is Potentially Undervalued and Its Shares Are Discounted:
American International Group, Inc. offers insurance products for commercial, institutional, and individual customers in North America and internationally. The company belongs to the Finance sector, which has an average price to earnings (P/E) ratio of 19.48 and an average price to book (P/B) ratio of 1.85. In contrast, American International has a trailing 12 month P/E ratio of 14.1 and a P/B ratio of 1.08.
When we divideAmerican International's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.56, 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's Revenues Are Declining:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $47,389 | $49,746 | $43,736 | $52,157 | $54,450 | $46,802 |
| Interest Income (M) | $1,309 | $1,417 | $1,457 | $1,305 | $1,125 | $1,136 |
| Operating Margins | 1% | 11% | -17% | 26% | 26% | 8% |
| Net Margins | 0% | 7% | -14% | 20% | 19% | 8% |
| Net Income (M) | -$6 | $3,348 | -$5,944 | $10,367 | $10,227 | $3,643 |
| Depreciation & Amort. (M) | $5,362 | $5,006 | $4,120 | $4,542 | $4,409 | $4,214 |
| Diluted Shares (M) | 888 | 896 | 869 | 865 | 788 | 725 |
| Earnings Per Share | -$0.01 | $3.74 | -$6.88 | $11.95 | $12.94 | $4.98 |
| EPS Growth | n/a | 37500.0% | -283.96% | 273.69% | 8.28% | -61.51% |
| Avg. Price | $45.65 | $44.93 | $31.26 | $48.0 | $57.0 | $73.84 |
| P/E Ratio | -4565.0 | 11.85 | -4.54 | 3.97 | 4.35 | 14.71 |
| Free Cash Flow (M) | -$762 | -$1,807 | $685 | $5,880 | $3,924 | $6,003 |
| CAPEX (M) | $368 | n/a | $353 | $343 | $210 | $240 |
| EV / EBITDA | 12.88 | 6.95 | -19.54 | 3.88 | 4.13 | 7.11 |
| Total Debt (M) | $34,540 | $35,350 | $37,534 | $30,163 | $33,059 | $5,182 |
| Net Debt / EBITDA | 5.55 | 3.16 | -10.94 | 1.56 | 1.65 | 0.37 |
American International has exceptional EPS growth, generally positive cash flows, and low leverage levels. However, the firm has slight revenue growth and decreasing reinvestment in the business. Finally, we note that American International has weak operating margins with a positive growth rate.
