Aflac Inc Valuation – January 2019 $AFL

Company Profile (excerpt from Reuters): Aflac Incorporated, incorporated on April 27, 1973, is a business holding company. The Company is involved in supplemental health and life insurance, which is marketed and administered through its subsidiary, American Family Life Assurance Company of Columbus (Aflac). The Company’s insurance business consists of two segments: Aflac Japan and Aflac U.S. Aflac offers insurance policies in Japan and the United States that provide a layer of financial protection against income and asset loss. Aflac Japan sells voluntary supplemental insurance products, including cancer plans, general medical indemnity plans, medical/sickness riders, care plans, living benefit life plans, ordinary life insurance plans and annuities. Aflac U.S. sells supplemental insurance products, including products designed to protect individuals from depletion of assets, such as accident, cancer, critical illness/care, hospital intensive care, hospital indemnity, fixed-benefit dental, and vision care plans and loss-of-income products, such as life and short-term disability plans.


Downloadable PDF version of this valuation:

ModernGraham Valuation of AFL – January 2019

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 $34,196,651,286 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
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 111.77% Pass
5. Moderate PEmg Ratio PEmg < 20 10.93 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.49 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 $4.11
MG Growth Estimate 5.32%
MG Value $78.68
Opinion Undervalued
MG Grade A+
MG Value based on 3% Growth $59.60
MG Value based on 0% Growth $34.94
Market Implied Growth Rate 1.21%
Current Price $44.92
% of Intrinsic Value 57.09%

AFLAC Incorporated qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value 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 $3.03 in 2014 to an estimated $4.11 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.21% 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 AFLAC Incorporated revealed the company was trading below its Graham Number of $53.04. The company pays a dividend of $0.87 per share, for a yield of 1.9% Its PEmg (price over earnings per share – ModernGraham) was 10.93, which was below the industry average of 30.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

AFLAC Incorporated fares extremely well in the ModernGraham grading system, scoring an A+.

Stage 3: Information for Further Research

Graham Number $53.04
PEmg 10.93
PB Ratio 1.49
Dividend Yield 1.94%
TTM Dividend $0.87
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Long-Term Debt & Capital Lease Obligation $5,279,000,000
Total Assets $137,941,000,000
Intangible Assets $0
Total Liabilities $114,707,000,000
Shares Outstanding (Diluted Average) 772,070,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.97
Dec2017 $5.77
Dec2016 $3.21
Dec2015 $2.93
Dec2014 $3.25
Dec2013 $3.38
Dec2012 $3.06
Dec2011 $2.06
Dec2010 $2.46
Dec2009 $1.60
Dec2008 $1.31
Dec2007 $1.66
Dec2006 $1.48
Dec2005 $1.46
Dec2004 $1.23
Dec2003 $0.74
Dec2002 $0.78
Dec2001 $0.64
Dec2000 $0.63
Dec1999 $0.52
Dec1998 $0.44

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $4.11
Dec2017 $4.02
Dec2016 $3.15
Dec2015 $3.06
Dec2014 $3.03
Dec2013 $2.79
Dec2012 $2.36
Dec2011 $1.95
Dec2010 $1.83
Dec2009 $1.51
Dec2008 $1.45
Dec2007 $1.45
Dec2006 $1.28
Dec2005 $1.11
Dec2004 $0.89
Dec2003 $0.70
Dec2002 $0.65

Recommended Reading:

Other ModernGraham posts about the company

Best Dividend Paying Stocks for Dividend Growth Investors – August 2018
Best Dividend Paying Stocks for Dividend Growth Investors – June 2018
10 Low PE Stock Picks for the Defensive Investor – June 2018
Best Stocks Below Their Graham Number – April 2018
Best Dividend Paying Stocks for Dividend Growth Investors – April 2018

Other ModernGraham posts about related companies

Progressive Corp Valuation – January 2019 $PGR
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Cincinnati Financial Corp Valuation – January 2019 $CINF
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Kemper Corp Valuation – August 2018 $KMPR
CNO Financial Group Inc Valuation – August 2018 $CNO
Sun Life Financial Inc Valuation – August 2018 $TSE-SLF
American Financial Group Inc Valuation – August 2018 $AFG


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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