Discounted Cash Flow Calculation for LSE:0HPH using Excess Returns Model Model
The calculations below outline how an intrinsic value for Brighthouse Financial is arrived at using the Excess Return Model. This approach is used for finance firms where free cash flow is difficult to estimate.
In the Excess Return Model the value of a firm can be written as the sum of capital invested currently in the firm and the present value of excess returns that the firm expects to make in the future.
The model is sensitive to the Return on Equity of the company versus the Cost of Equity, how these are calculated is detailed below the main calculation.
Amount off the current price
is available for.
Share price is
vs Future cash flow value of
Current Discount Checks
to be considered undervalued it must be available for at least 20% below the
current price. Less than 40% is even better.
Brighthouse Financial's share price is below the future cash flow value, and at a moderate discount (> 20%).
Brighthouse Financial's share price is below the future cash flow value, and at a substantial discount (> 40%).
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for
it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing
when they are out of season, or how much your home is worth.
The amount the stock market is willing to pay for
is considered below, and whether this is a fair price.
Price based on past earnings
Brighthouse Financial's earnings available for a low price, and how does
this compare to other companies in the same industry?
Brighthouse Financial's earnings are expected to decrease over the next 1-3 years, this is not considered high growth.
Brighthouse Financial's revenue is expected to decrease over the next 1-3 years, this is not considered high growth.
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can
be gauged below. We look back 3 years and see if they were any good at
predicting what actually occurred. We also show the highest and lowest estimates
looking forward to see if there is a wide range.
Brighthouse Financial's performance over the past 5 years by checking for:
Has earnings increased in past 5 years? (1 check)
Has the earnings growth in the last year exceeded that of the
industry? (1 check)
Is the recent earnings growth over the last year higher than the average annual growth over the
past 5 years? (1 check)
Is the Return on Equity (ROE) higher than 20%? (1 check)
Is the Return on Assets (ROA) above industry average? (1 check)
Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent
earnings report. Some checks require at least 3 or 5 years worth of data.
has a total score of
0/6, see the detailed checks below.
Note: We use GAAP Net Income excluding extraordinary items in all our calculations.
A company's financial position is much like your own financial position,
it includes everything you own
The boxes below represent the relative size of what makes up
Brighthouse Financial's finances.
The net worth of a company is the difference between its assets and liabilities.
Brighthouse Financial is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
Brighthouse Financial's long term commitments exceed its cash and other short term assets.
This treemap shows a more detailed breakdown of
Brighthouse Financial's finances. If any of them are yellow this
indicates they may be out of proportion and red means they relate to one of the
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
Low level of unsold assets.
Debt is covered by short term assets, assets are 2.2x debt.
Nearly all companies have debt. Debt in itself isn’t
however if the debt is too high, or the company can’t afford to pay the interest
on its debts this may have impacts in the future.
The graphic below shows equity (available funds) and debt, we ideally want to
see the red area (debt) decreasing.
If there is any debt we look at the companies capability to repay it, and
whether the level has increased over the past 5 years.
Management is one of the most important areas of a company. We look at
unreasonable CEO compensation, how long the team and board of directors have
been around for and insider trading.
TENURE AS CEO
Mr. Eric Thomas Steigerwalt serves as the President, Chief Executive Officer and Director at Brighthouse Financial, Inc. since August 2016. Mr. Steigerwalt serves as Chairman, Chief Executive Officer and President at Brighthouse Life Insurance Company. He serves as the Chairman, president and Chief Executive Officer of MetLife Insurance Company USA. He has extensive experience in the insurance industry and has leadership skills, and also has broad knowledge in corporate strategy, finance and investments. He served as Executive Vice President of MetLife U.S. Retail Business since September 2012 to August 2017. He served as Head of US Retail and Senior Vice President at MetLife from May 2007 to September 2009, Inc. He served as an Interim Chief Financial Officer and Executive Vice President of MetLife, Inc. from November 2011 to September 2012. He served as the Senior Vice President and Chief Financial Officer of Individual Business at MetLife, Inc. from July 2003 to May 2007. Mr. Steigerwalt served as Treasurer of MetLife, Inc. from May 2007 to September 2009. He served as Executive Vice President and Chief Financial Officer of U.S. Business from January 2010 to November 2011. Mr. Steigerwalt served as Senior Vice President and Chief Financial Officer of U.S. Business From September 2009 to January 2010. He served as Senior Vice President, in charge of expense management and agency compensation for MetLife, Inc.'s Individual Business segment until May 19, 2003. He began his tenure at MetLife in 1998, managing many of the operational aspects of MetLife’s demutualization and IPO and went on to become the company’s first head of investor relations. He served as Vice President of AXA S.A., a financial services and insurance company from May 1993 to May 1998. He held multiple leadership roles at MetLife over the course of 18 years. Before joining MetLife, Mr. Steigerwalt worked in finance at the Equitable Companies and at the Fossett Corporation where he was a derivatives trader. He has been Director at LL Global Inc since November 5, 2014. He serves as a Director of LIMRA Inc. and LOMA and the Wells Fargo Championship’s Champions for Education foundation. He holds BA in Economics from Drew University.
Insufficient data for Eric to compare compensation growth.
Eric's remuneration is about average for companies of similar size in United Kingdom of Great Britain and Northern Ireland.
Management Team Tenure
Average tenure and age of the
management team in years:
The tenure for the Brighthouse Financial management team is about average.
Executive VP & Chief Investment Officer
Chief Accounting Officer
Head of Investor Relations
Executive VP and Chief Distribution & Marketing Officer
VP & Treasurer
Board of Directors Tenure
Average tenure and age of the
board of directors in years:
The average tenure for the Brighthouse Financial board of directors is less than 3 years, this suggests a new board.
Brighthouse Financial, Inc. provides annuity and life insurance products in the United States. It operates through three segments: Annuities, Life, and Run-off. The Annuities segment offers variable, fixed, index-linked, and income annuities for contract holders’ needs for protected wealth accumulation on a tax-deferred basis, wealth transfer, and income security. The Life segment consist of term, universal, whole, and variable life products for policyholders’ needs for financial security and protected wealth transfer. The Run-off segment provides structured settlements, pension risk transfer contracts, certain company-owned life insurance policies, funding agreements, and universal life with secondary guarantees. The company was founded in 2016 and is headquartered in Charlotte, North Carolina.
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