Insurance Stocks

Genworth Financial Inc Valuation – June 2018 $GNW

Company Profile (excerpt from Reuters): Genworth Financial, Inc., incorporated on December 5, 2012, provides mortgage insurance products that allow people to purchase homes. The Company offers individual and group long-term care insurance products to meet consumer needs for long-term care. Its segments include U.S. Mortgage Insurance, Canada Mortgage Insurance, Australia Mortgage Insurance, U.S. Life Insurance, Runoff, and Corporate and Other.


Downloadable PDF version of this valuation:

ModernGraham Valuation of GNW – June 2018

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 $2,227,208,522 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -346.99% Fail
5. Moderate PEmg Ratio PEmg < 20 14.21 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.15 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 Fail
3. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $0.32
MG Growth Estimate 15.00%
MG Value $12.19
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $4.59
MG Value based on 0% Growth $2.69
Market Implied Growth Rate 2.86%
Current Price $4.50
% of Intrinsic Value 36.91%

Genworth Financial Inc 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 poor dividend history. The Enterprising Investor has concerns regarding the lack of earnings stability over the last five years, and the lack of dividends. 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 Undervalued after growing its EPSmg (normalized earnings) from $-0.39 in 2014 to an estimated $0.32 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.86% 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 above the price.

At the time of valuation, further research into Genworth Financial Inc revealed the company was trading below its Graham Number of $24.35. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 14.21, which was below the industry average of 30.02, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Genworth Financial Inc receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Graham Number $24.35
PEmg 14.21
PB Ratio 0.15
Dividend Yield 0.00%
TTM Dividend $0.00
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2018
Long-Term Debt & Capital Lease Obligation $4,996,000,000
Total Assets $103,773,000,000
Intangible Assets $339,000,000
Total Liabilities $88,911,000,000
Shares Outstanding (Diluted Average) 502,700,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $0.98
Dec2017 $1.63
Dec2016 -$0.56
Dec2015 -$1.24
Dec2014 -$2.51
Dec2013 $1.12
Dec2012 $0.66
Dec2011 $0.08
Dec2010 $0.11
Dec2009 -$1.02
Dec2008 -$1.32
Dec2007 $2.73
Dec2006 $2.83
Dec2005 $2.52
Dec2004 $2.26
Dec2003 $1.88

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $0.32
Dec2017 -$0.11
Dec2016 -$0.83
Dec2015 -$0.77
Dec2014 -$0.39
Dec2013 $0.51
Dec2012 $0.04
Dec2011 -$0.14
Dec2010 $0.05
Dec2009 $0.40
Dec2008 $1.34
Dec2007 $2.60
Dec2006 $2.32
Dec2005 $1.82
Dec2004 $1.25
Dec2003 $0.63

Recommended Reading:

Other ModernGraham posts about the company

Genworth Financial Inc Valuation – August 2016 $GNW
Genworth Financial Analysis – 2015 Annual Update $GNW
15 Companies in the Spotlight This Week – 5/31/14
Genworth Financial 2014 Annual Valuation $GNW

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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.

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