Stock Analysis

Are Poor Financial Prospects Dragging Down UnipolSai Assicurazioni S.p.A. (BIT:US Stock?

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BIT:US
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With its stock down 15% over the past three months, it is easy to disregard UnipolSai Assicurazioni (BIT:US). Given that stock prices are usually driven by a company’s fundamentals over the long term, which in this case look pretty weak, we decided to study the company's key financial indicators. In this article, we decided to focus on UnipolSai Assicurazioni's ROE.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. Put another way, it reveals the company's success at turning shareholder investments into profits.

View our latest analysis for UnipolSai Assicurazioni

How Do You Calculate Return On Equity?

ROE can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for UnipolSai Assicurazioni is:

9.6% = €604m ÷ €6.3b (Based on the trailing twelve months to June 2022).

The 'return' is the profit over the last twelve months. Another way to think of that is that for every €1 worth of equity, the company was able to earn €0.10 in profit.

What Has ROE Got To Do With Earnings Growth?

So far, we've learned that ROE is a measure of a company's profitability. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don't have the same features.

UnipolSai Assicurazioni's Earnings Growth And 9.6% ROE

When you first look at it, UnipolSai Assicurazioni's ROE doesn't look that attractive. Next, when compared to the average industry ROE of 14%, the company's ROE leaves us feeling even less enthusiastic. Accordingly, UnipolSai Assicurazioni's low net income growth of 2.5% over the past five years can possibly be explained by the low ROE amongst other factors.

We then compared UnipolSai Assicurazioni's net income growth with the industry and found that the company's growth figure is lower than the average industry growth rate of 13% in the same period, which is a bit concerning.

past-earnings-growth
BIT:US Past Earnings Growth August 15th 2022

The basis for attaching value to a company is, to a great extent, tied to its earnings growth. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. This then helps them determine if the stock is placed for a bright or bleak future. Is US fairly valued? This infographic on the company's intrinsic value has everything you need to know.

Is UnipolSai Assicurazioni Using Its Retained Earnings Effectively?

With a high three-year median payout ratio of 66% (or a retention ratio of 34%), most of UnipolSai Assicurazioni's profits are being paid to shareholders. This definitely contributes to the low earnings growth seen by the company.

In addition, UnipolSai Assicurazioni has been paying dividends over a period of eight years suggesting that keeping up dividend payments is way more important to the management even if it comes at the cost of business growth. Upon studying the latest analysts' consensus data, we found that the company is expected to keep paying out approximately 73% of its profits over the next three years. Accordingly, forecasts suggest that UnipolSai Assicurazioni's future ROE will be 9.3% which is again, similar to the current ROE.

Conclusion

On the whole, UnipolSai Assicurazioni's performance is quite a big let-down. Because the company is not reinvesting much into the business, and given the low ROE, it's not surprising to see the lack or absence of growth in its earnings. Having said that, looking at the current analyst estimates, we found that the company's earnings are expected to gain momentum. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.

Valuation is complex, but we're helping make it simple.

Find out whether UnipolSai Assicurazioni is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About BIT:US

UnipolSai Assicurazioni

UnipolSai Assicurazioni S.p.A. operates as an insurance company in Italy.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation2
Future Growth2
Past Performance2
Financial Health4
Dividends3

Read more about these checks in the individual report sections or in our analysis model.

Adequate balance sheet second-rate dividend payer.