Stock Analysis
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Investing in Assurant (NYSE:AIZ) five years ago would have delivered you a 67% gain
These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the Assurant, Inc. (NYSE:AIZ) share price is up 51% in the last five years, slightly above the market return. In stark contrast, the stock price has actually fallen 19% in the last year.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Assurant
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Over half a decade, Assurant managed to grow its earnings per share at 8.7% a year. This EPS growth is remarkably close to the 9% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Assurant the TSR over the last 5 years was 67%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We regret to report that Assurant shareholders are down 17% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 9.3%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 11%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Assurant better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Assurant .
We will like Assurant better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
What are the risks and opportunities for Assurant?
Assurant, Inc., together with its subsidiaries, provides business services that supports, protects, and connects consumer purchases in North America, Latin America, Europe, and the Asia Pacific.
Rewards
Trading at 44.9% below our estimate of its fair value
Earnings are forecast to grow 33.16% per year
Risks
Significant insider selling over the past 3 months
Profit margins (2.7%) are lower than last year (5.9%)
Further research on
Assurant
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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.
About NYSE:AIZ
Assurant
Assurant, Inc., together with its subsidiaries, provides business services that supports, protects, and connects consumer purchases in North America, Latin America, Europe, and the Asia Pacific.
Established dividend payer and good value.
