With A -13% Earnings Drop, Did Assurant, Inc. (NYSE:AIZ) Really Underperform?

August 07, 2019

When Assurant, Inc. (NYSE:AIZ) released its most recent earnings update (30 June 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Assurant's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not AIZ actually performed well. Below is a quick commentary on how I see AIZ has performed.

See our latest analysis for Assurant

Was AIZ's weak performance lately a part of a long-term decline?

AIZ's trailing twelve-month earnings (from 30 June 2019) of US$369m has declined by -13% compared to the previous year.

Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -0.8%, indicating the rate at which AIZ is growing has slowed down. Why is this? Well, let’s take a look at what’s occurring with margins and if the entire industry is facing the same headwind.

NYSE:AIZ Income Statement, August 8th 2019

In terms of returns from investment, Assurant has fallen short of achieving a 20% return on equity (ROE), recording 6.8% instead. Furthermore, its return on assets (ROA) of 1.1% is below the US Insurance industry of 2.5%, indicating Assurant's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Assurant’s debt level, has declined over the past 3 years from 3.9% to 3.0%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 24% to 64% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Typically companies that experience an extended period of decline in earnings are going through some sort of reinvestment phase with the aim of keeping up with the latest industry disruption and growth. You should continue to research Assurant to get a more holistic view of the stock by looking at:

Financial Health: Are AIZ’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Valuation: What is AIZ worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether AIZ is currently mispriced by the market.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2019. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.