Company ProfileÂ (obtained fromÂ Marketwatch): Aspen Insurance Holdings Ltd. engages in the provision of insurance and reinsurance services. It operates through the Reinsurance and Insurance business segments. The Reinsurance segment includes property catastrophe insurance; other property insurance such as risk excess, pro rata, and facultative or single risk reinsurance; casualty insurance such as U.S. treaty, international treaty, and global facultative; and specialty insurance and reinsurance such as credit and surety, mortgage, agriculture, marine, aviation, terrorism, engineering, and other specialty lines. The Insurance segment consists of property and casualty insurance; marine, aviation, and energy insurance; and financial and professional lines insurance. The company was founded by Christopher O’Kane and Julian M. Cusack on May 23, 2002 and is headquartered in Hamilton, Bermuda.
Downloadable PDF version of this valuation:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|Defensive Investor; must pass all 6 of the following tests.|
|1. Adequate Size of the Enterprise||Market Cap > $2Bil||$2,453,521,940||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||-91.33%||Fail|
|5. Moderate PEmg Ratio||PEmg < 20||36.23||Fail|
|6. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||0.84||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||Fail|
|2. Dividend Record||Currently Pays Dividend||Pass|
|3. Earnings Growth||EPSmg greater than 5 years ago||Fail|
Stage 2: Determination of Intrinsic Value
|MG Growth Estimate||-4.25%|
|MG Value based on 3% Growth||$16.53|
|MG Value based on 0% Growth||$9.69|
|Market Implied Growth Rate||13.86%|
|% of Intrinsic Value||N/A|
Aspen Insurance Holdings Limited does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.
As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.38 in 2014 to an estimated $1.14 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 13.86% 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 below the price.
At the time of valuation, further research into Aspen Insurance Holdings Limited revealed the company was trading below its Graham Number of $59.98. The company pays a dividend of $0.94 per share, for a yield of 2.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 36.23, which was above the industry average of 22.76.
Aspen Insurance Holdings Limited receives an average overall rating in the ModernGraham grading system, scoring a C-.
Stage 3: Information for Further Research
|Number of Consecutive Years of Dividend Growth||6|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||12/1/2017|
|Long-Term Debt & Capital Lease Obligation||$593,700,000|
|Shares Outstanding (Diluted Average)||59,428,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$3.25|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$1.14|
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The author did not hold aÂ position in any company mentioned in this articleÂ at the time of publication and had no intention of changing that position within the next 72 hours. Â See my current holdings here. Â This article is not investment advice; any reader should speak to aÂ registeredÂ investment adviser prior to making any investment decisions. Â ModernGraham is not affiliated with the company in any manner. Â Please be sure to review our detailed disclaimer.