MetLife Inc Valuation – December 2016 $MET
Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – December 2016. By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how MetLife Inc (MET) fares in the ModernGraham valuation model.
Company Profile (obtained from Google Finance): MetLife, Inc. (MetLife) is a provider of life insurance, annuities, employee benefits and asset management. The Company’s segments include Retail; Group, Voluntary & Worksite Benefits; Corporate Benefit Funding; Latin America (collectively, the Americas); Asia, and Europe, the Middle East and Africa (EMEA). Its Retail segment is organized into two businesses: Life & Other, and Annuities. Its Group, Voluntary & Worksite Benefits insurance products and services include life, dental, group short- and long-term disability, property and casualty, long-term care, accidental death and dismemberment, critical illness, vision, and accident and health coverages, as well as prepaid legal plans. Its Corporate Benefit Funding segment provides funding and financing solutions that help institutional customers manage liabilities primarily associated with their qualified, nonqualified and welfare employee benefit programs using a spectrum of life and annuity-based insurance and investment products.
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Downloadable PDF version of this valuation:
ModernGraham Valuation of MET – December 2016
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
What kind of Intelligent Investor are you?
| Defensive Investor; must pass all 6 of the following tests. | ||||
| 1. Adequate Size of the Enterprise | Market Cap > $2Bil | $61,376,377,207 | Pass | |
| 2. Earnings Stability | Positive EPS for 10 years prior | Fail | ||
| 3. Dividend Record | Dividend Payments for 10 years prior | Pass | ||
| 4. Earnings Growth | Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end | 105.35% | Pass | |
| 5. Moderate PEmg Ratio | PEmg < 20 | 14.01 | Pass | |
| 6. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 0.80 | Pass | |
| Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor. | ||||
| 1. Earnings Stability | Positive EPS for 5 years prior | Pass | ||
| 2. Dividend Record | Currently Pays Dividend | Pass | ||
| 3. Earnings Growth | EPSmg greater than 5 years ago | Pass | ||
Stage 2: Determination of Intrinsic Value
| EPSmg | $4.04 |
| MG Growth Estimate | 10.56% |
| MG Value | $119.73 |
| Opinion | Undervalued |
| MG Grade | B |
| MG Value based on 3% Growth | $58.61 |
| MG Value based on 0% Growth | $34.36 |
| Market Implied Growth Rate | 2.75% |
| Current Price | $56.61 |
| % of Intrinsic Value | 47.28% |
Metlife Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.37 in 2012 to an estimated $4.04 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.75% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Metlife Inc revealed the company was trading below its Graham Number of $78.35. The company pays a dividend of $1.55 per share, for a yield of 2.7%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.01, which was below the industry average of 16.56, which by some methods of valuation makes it one of the most undervalued stocks in its industry.
Metlife Inc performs fairly well in the ModernGraham grading system, scoring a B.
Stage 3: Information for Further Research
| Graham Number | $78.35 |
| PEmg | 14.01 |
| PB Ratio | 0.80 |
| Dividend Yield | 2.74% |
| TTM Dividend | $1.55 |
| Number of Consecutive Years of Dividend Growth | 4 |
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Useful Links:
| ModernGraham tagged articles | Morningstar |
| Google Finance | MSN Money |
| Yahoo Finance | Seeking Alpha |
| GuruFocus | SEC Filings |
Most Recent Balance Sheet Figures
| Balance Sheet Information | 9/1/2016 |
| Long-Term Debt & Capital Lease Obligation | $19,721,000,000 |
| Total Assets | $952,904,000,000 |
| Intangible Assets | $9,592,000,000 |
| Total Liabilities | $874,618,000,000 |
| Shares Outstanding (Diluted Average) | 1,109,254,000 |
Earnings Per Share History
| Next Fiscal Year Estimate | $3.83 |
| Dec2015 | $4.57 |
| Dec2014 | $5.42 |
| Dec2013 | $2.91 |
| Dec2012 | $1.12 |
| Dec2011 | $5.76 |
| Dec2010 | $2.86 |
| Dec2009 | -$2.89 |
| Dec2008 | $4.14 |
| Dec2007 | $5.48 |
| Dec2006 | $7.99 |
| Dec2005 | $6.16 |
| Dec2004 | $3.65 |
| Dec2003 | $2.94 |
| Dec2002 | $2.20 |
| Dec2001 | $0.62 |
| Dec2000 | $1.49 |
Earnings Per Share – ModernGraham History
| Next Fiscal Year Estimate | $4.04 |
| Dec2015 | $4.08 |
| Dec2014 | $3.77 |
| Dec2013 | $2.61 |
| Dec2012 | $2.37 |
| Dec2011 | $3.02 |
| Dec2010 | $2.27 |
| Dec2009 | $2.71 |
| Dec2008 | $5.50 |
| Dec2007 | $5.87 |
| Dec2006 | $5.57 |
| Dec2005 | $3.95 |
| Dec2004 | $2.62 |
| Dec2003 | $1.89 |
| Dec2002 | $1.20 |
| Dec2001 | $0.60 |
| Dec2000 | $0.50 |
Recommended Reading:
Other ModernGraham posts about the company
Other ModernGraham posts about related companies
Disclaimer:
The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.
