Assurant, Inc.'s (NYSE:AIZ) Subdued P/E Might Signal An Opportunity

When close to half the companies in the United States have price-to-earnings ratios (or "P/E's") above 17x, you may consider Assurant, Inc. (NYSE:AIZ) as an attractive investment with its 14x P/E ratio. However, the P/E might be low for a reason and it requires further investigation to determine if it's justified.

With its earnings growth in positive territory compared to the declining earnings of most other companies, Assurant has been doing quite well of late. One possibility is that the P/E is low because investors think the company's earnings are going to fall away like everyone else's soon. If you like the company, you'd be hoping this isn't the case so that you could potentially pick up some stock while it's out of favour.

View our latest analysis for Assurant

Want the full picture on analyst estimates for the company? Then our free report on Assurant will help you uncover what's on the horizon.

What Are Growth Metrics Telling Us About The Low P/E?

There's an inherent assumption that a company should underperform the market for P/E ratios like Assurant's to be considered reasonable.

Taking a look back first, we see that the company grew earnings per share by an impressive 136% last year. The strong recent performance means it was also able to grow EPS by 48% in total over the last three years. So we can start by confirming that the company has done a great job of growing earnings over that time.

Looking ahead now, EPS is anticipated to climb by 20% per annum during the coming three years according to the five analysts following the company. That's shaping up to be materially higher than the 11% per annum growth forecast for the broader market.

In light of this, it's peculiar that Assurant's P/E sits below the majority of other companies. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

What We Can Learn From Assurant's P/E?

It's argued the price-to-earnings ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Assurant currently trades on a much lower than expected P/E since its forecast growth is higher than the wider market. When we see a strong earnings outlook with faster-than-market growth, we assume potential risks are what might be placing significant pressure on the P/E ratio. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

Many other vital risk factors can be found on the company's balance sheet. Our free balance sheet analysis for Assurant with six simple checks will allow you to discover any risks that could be an issue.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.