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

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 9/1/2018
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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Travelers Companies Inc Valuation – November 2018 $TRV
Stewart Information Services Corp Valuation – August 2018 $STC
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

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.

AFLAC Inc Valuation – March 2018 $AFL

Company Profile (obtained from Marketwatch): Aflac, Inc. operates as a holding company, which engages in the provision of management services. It operates through the Aflac Japan and Aflac United States segments. The Aflac Japan segment offers life insurance, death benefits, and cash surrender values. The Aflac U.S. segment sells voluntary supplemental insurance products for people who already have major medical or primary insurance coverage. The company was founded by John Amos, Daniel Paul Amos, and William Amos on November 17, 1955 and is headquartered in Columbus, GA.

AFL Chart

AFL data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of AFL – March 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 $34,389,525,456 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 108.42% Pass
5. Moderate PEmg Ratio PEmg < 20 10.92 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.42 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 $8.08
MG Growth Estimate 4.98%
MG Value $149.29
Opinion Undervalued
MG Grade A-
MG Value based on 3% Growth $117.23
MG Value based on 0% Growth $68.72
Market Implied Growth Rate 1.21%
Current Price $88.25
% of Intrinsic Value 59.11%

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 $6.07 in 2014 to an estimated $8.08 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 $103.31. The company pays a dividend of $1.74 per share, for a yield of 2% Its PEmg (price over earnings per share – ModernGraham) was 10.92, which was below the industry average of 22.76, 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 $103.31
PEmg 10.92
PB Ratio 1.42
Dividend Yield 1.97%
TTM Dividend $1.74
Number of Consecutive Years of Dividend Growth 20

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 12/1/2017
Long-Term Debt & Capital Lease Obligation $5,289,000,000
Total Assets $137,217,000,000
Intangible Assets $0
Total Liabilities $112,619,000,000
Shares Outstanding (Diluted Average) 394,997,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $7.53
Dec2017 $11.54
Dec2016 $6.42
Dec2015 $5.85
Dec2014 $6.50
Dec2013 $6.76
Dec2012 $6.11
Dec2011 $4.12
Dec2010 $4.92
Dec2009 $3.19
Dec2008 $2.62
Dec2007 $3.31
Dec2006 $2.95
Dec2005 $2.92
Dec2004 $2.45
Dec2003 $1.47
Dec2002 $1.55
Dec2001 $1.28
Dec2000 $1.26
Dec1999 $1.04
Dec1998 $0.88

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.08
Dec2017 $8.05
Dec2016 $6.31
Dec2015 $6.12
Dec2014 $6.07
Dec2013 $5.58
Dec2012 $4.72
Dec2011 $3.89
Dec2010 $3.65
Dec2009 $3.01
Dec2008 $2.90
Dec2007 $2.90
Dec2006 $2.55
Dec2005 $2.21
Dec2004 $1.77
Dec2003 $1.40
Dec2002 $1.31

Recommended Reading:

Other ModernGraham posts about the company

Dividend Growth Stocks for Intelligent Investors – July 2016
10 Low PE Stocks for the Defensive Investor – July 2016
Dividend Growth Stocks for Intelligent Investors – June 2016
10 Low PE Stocks for the Defensive Investor – June 2016
10 Low PE Stocks for the Defensive Investor – May 2016

Other ModernGraham posts about related companies

Progressive Corp Valuation – February 2018 $PGR
Cincinnati Financial Corp Valuation – February 2018 $CINF
Lincoln National Corp Valuation – February 2018 $LNC
Aon PLC Valuation – February 2018 $AON
Travelers Companies Inc Valuation – February 2018 $TRV
Hanover Insurance Group Valuation – Initial Coverage $THG
Prudential Financial Inc Valuation – July 2017 $PRU
Assurant Inc Valuation – March 2017 $AIZ
American International Group Inc Valuation – March 2017 $AIG
Torchmark Corporation Valuation – March 2017 $TMK

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.

AFLAC Inc Valuation – December 2016 $AFL

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 AFLAC Inc (AFL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Aflac Incorporated is a business holding company. The Company engaged in is supplemental health and life insurance, which is marketed and administered through its subsidiary, American Family Life Assurance Company of Columbus (Aflac). Aflac’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.

AFL Chart

AFL data by YCharts

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of AFL – 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 $28,539,012,424 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 102.96% Pass
5. Moderate PEmg Ratio PEmg < 20 11.22 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.26 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 $6.22
MG Growth Estimate 4.78%
MG Value $112.32
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $90.22
MG Value based on 0% Growth $52.89
Market Implied Growth Rate 1.36%
Current Price $69.79
% of Intrinsic Value 62.13%

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 $4.72 in 2012 to an estimated $6.22 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.36% 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 $87.98. The company pays a dividend of $1.64 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 11.22, which was below the industry average of 18.78, 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 $87.98
PEmg 11.22
PB Ratio 1.26
Dividend Yield 2.35%
TTM Dividend $1.64
Number of Consecutive Years of Dividend Growth 20

[/not-level-free]

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 $5,765,000,000
Total Assets $144,101,000,000
Intangible Assets $0
Total Liabilities $121,316,000,000
Shares Outstanding (Diluted Average) 411,140,000

Earnings Per Share History

Next Fiscal Year Estimate $6.16
Dec2015 $5.85
Dec2014 $6.50
Dec2013 $6.76
Dec2012 $6.11
Dec2011 $4.12
Dec2010 $4.92
Dec2009 $3.19
Dec2008 $2.62
Dec2007 $3.31
Dec2006 $2.95
Dec2005 $2.92
Dec2004 $2.45
Dec2003 $1.47
Dec2002 $1.55
Dec2001 $1.28
Dec2000 $1.26
Dec1999 $1.04
Dec1998 $0.88
Dec1997 $1.04
Dec1996 $0.68

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $6.22
Dec2015 $6.12
Dec2014 $6.07
Dec2013 $5.58
Dec2012 $4.72
Dec2011 $3.89
Dec2010 $3.65
Dec2009 $3.01
Dec2008 $2.90
Dec2007 $2.90
Dec2006 $2.55
Dec2005 $2.21
Dec2004 $1.77
Dec2003 $1.40
Dec2002 $1.31
Dec2001 $1.16
Dec2000 $1.06

Recommended Reading:

Other ModernGraham posts about the company

Dividend Growth Stocks for Intelligent Investors – July 2016
10 Low PE Stocks for the Defensive Investor – July 2016
Dividend Growth Stocks for Intelligent Investors – June 2016
10 Low PE Stocks for the Defensive Investor – June 2016
10 Low PE Stocks for the Defensive Investor – May 2016

Other ModernGraham posts about related companies

Travelers Companies Inc Valuation – November 2016 $TRV
Allstate Corp Valuation – November 2016 $ALL
Unum Group Valuation – August 2016 $UNM
Principal Financial Group Inc Valuation – August 2016 $PFG
Assurant Inc Valuation – August 2016 $AIZ
American International Group Inc Valuation – August 2016 $AIG
Humana Inc Valuation – August 2016 $HUM
Chubb Limited Valuation – August 2016 $CB
Torchmark Corporation Valuation – August 2016 $TMK
Anthem Inc Valuation – August 2016 $ANTM

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.

AFLAC Inc Valuation – August 2016 $AFL

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 Companies Benjamin Graham Would Invest In Today - July 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 AFLAC Inc (AFL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Aflac Incorporated is a business holding company. The Company engaged in is supplemental health and life insurance, which is marketed and administered through its subsidiary, American Family Life Assurance Company of Columbus (Aflac). Aflac’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.

AFL Chart

AFL data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of AFL – August 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 $30,716,643,729 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 104.50% Pass
5. Moderate PEmg Ratio PEmg < 20 11.66 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.34 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

AFL value chart August 2016

EPSmg $6.27
MG Growth Estimate 4.92%
MG Value $115.02
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $90.90
MG Value based on 0% Growth $53.28
Market Implied Growth Rate 1.58%
Current Price $73.07
% of Intrinsic Value 63.53%

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 $4.72 in 2012 to an estimated $6.27 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.58% 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 $87.87. The company pays a dividend of $1.62 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.66, 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.

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

Stage 3: Information for Further Research

AFL charts August 2016

Graham Number $87.87
PEmg 11.66
PB Ratio 1.34
Dividend Yield 2.22%
TTM Dividend $1.62
Number of Consecutive Years of Dividend Growth 20

[/not-level-free]

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 6/1/2016
Long-Term Debt & Capital Lease Obligation $5,009,000,000
Total Assets $141,287,000,000
Intangible Assets $0
Total Liabilities $118,737,000,000
Shares Outstanding (Diluted Average) 414,326,000

Earnings Per Share History

Next Fiscal Year Estimate $6.30
Dec2015 $5.85
Dec2014 $6.50
Dec2013 $6.76
Dec2012 $6.11
Dec2011 $4.12
Dec2010 $4.92
Dec2009 $3.19
Dec2008 $2.62
Dec2007 $3.31
Dec2006 $2.95
Dec2005 $2.92
Dec2004 $2.45
Dec2003 $1.50
Dec2002 $1.49
Dec2001 $1.28
Dec2000 $1.26
Dec1999 $1.04
Dec1998 $0.88
Dec1997 $1.04
Dec1996 $0.68

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $6.27
Dec2015 $6.12
Dec2014 $6.07
Dec2013 $5.58
Dec2012 $4.72
Dec2011 $3.89
Dec2010 $3.65
Dec2009 $3.01
Dec2008 $2.90
Dec2007 $2.90
Dec2006 $2.55
Dec2005 $2.21
Dec2004 $1.77
Dec2003 $1.39
Dec2002 $1.29
Dec2001 $1.16
Dec2000 $1.06

Recommended Reading:

Other ModernGraham posts about the company

Dividend Growth Stocks for Intelligent Investors – July 2016
10 Low PE Stocks for the Defensive Investor – July 2016
Dividend Growth Stocks for Intelligent Investors – June 2016
10 Low PE Stocks for the Defensive Investor – June 2016
10 Low PE Stocks for the Defensive Investor – May 2016

Other ModernGraham posts about related companies

MetLife Inc Valuation – August 2016 $MET
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Aetna Inc Valuation – July 2016 $AET
XL Group Ltd Valuation – July 2016 $XL
Marsh & McLennan Companies Inc Valuation – July 2016 $MMC
Cigna Corp Valuation – July 2016 $CI
Progressive Corporation Valuation – June 2016 $PGR
Cincinnati Financial Corporation Valuation – May 2016 $CINF
Lincoln National Corporation Valuation – May 2016 $LNC
Allstate Corporation Valuation – May 2016 $ALL

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.

Aflac Inc Valuation – February 2016 $AFL

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 Companies Benjamin Graham Would Invest In Today – February 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 Aflac Inc (AFL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Aflac Incorporated (Aflac) is a business holding company. The Company is engaged in supplemental health and life insurance, which is marketed and administered through its subsidiary, American Family Life Assurance Company of Columbus (Aflac). Aflac offers insurance policies in Japan and the United States that provide a layer of financial protection against income and asset loss. Aflac’s insurance business consists of two segments: Aflac Japan and Aflac U.S. Aflac Japan sells voluntary supplemental insurance products, including cancer plans, medical indemnity plans, medical/sickness riders, care plans, living benefit life plans, ordinary life insurance plans and annuities. Aflac U.S. sells 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.

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ModernGraham Valuation of AFL

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 $24,460,660,000 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 103.40% Pass
5. Moderate PEmg Ratio PEmg < 20 9.31 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.43 Pass
Score
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

AFL value chart February 2016

EPSmg $6.24
MG Growth Estimate 4.82%
MG Value $113.09
Opinion Undervalued
MG Value based on 3% Growth $90.41
MG Value based on 0% Growth $53.00
Market Implied Growth Rate 0.40%
Current Price $58.02
% of Intrinsic Value 51.30%

Aflac Inc qualifies for both the Enterprising Investor and the more conservative Defensive Investor.  In fact, the company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $4.72 in 2012 to an estimated $6.24 for 2016.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.40% 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.

Stage 3: Information for Further Research

AFL charts February 2016

Graham Number $75.30
PEmg 9.31
PB Ratio 1.43
Dividend Yield 2.69%
Number of Consecutive Years of Dividend Growth 0

 

[/not-level-free]

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 Dec2015
Long-Term Debt $5,011,000,000
Total Assets $118,296,000,000
Intangible Assets $0
Total Liabilities $100,914,000,000
Shares Outstanding (Diluted Average) 427,570,000

Earnings Per Share History

Next Fiscal Year Estimate $6.20
Dec2015 $5.85
Dec2014 $6.50
Dec2013 $6.76
Dec2012 $6.11
Dec2011 $4.12
Dec2010 $4.92
Dec2009 $3.19
Dec2008 $2.62
Dec2007 $3.31
Dec2006 $2.95
Dec2005 $2.92
Dec2004 $2.45
Dec2003 $1.50
Dec2002 $1.49
Dec2001 $1.28
Dec2000 $1.26
Dec1999 $1.04
Dec1998 $0.88
Dec1997 $1.04
Dec1996 $0.68

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $6.24
Dec2015 $6.12
Dec2014 $6.07
Dec2013 $5.58
Dec2012 $4.72
Dec2011 $3.89
Dec2010 $3.65
Dec2009 $3.01
Dec2008 $2.90
Dec2007 $2.90
Dec2006 $2.55
Dec2005 $2.21
Dec2004 $1.77
Dec2003 $1.39
Dec2002 $1.29
Dec2001 $1.16
Dec2000 $1.06

Recommended Reading:

Other ModernGraham posts about the company

10 Low PE Stocks for the Defensive Investor – January 2016
15 Best Stocks For Value Investors This Week – 9/12/15
Aflac Inc. Analysis – September 2015 Update $AFL
10 Companies Benjamin Graham Would Invest In Today – September 2015
10 Low PE Stocks for the Defensive Investor – August 2015

Other ModernGraham posts about related companies

MetLife Inc Valuation – February 2016 Update $MET
Aetna Inc Valuation – February 2016 Update $AET
Marsh & McLennan Company Valuation – January 2016 Update $MMC
Aon PLC Valuation – January 2016 Update $AON
Progressive Corp Valuation – November 2015 Update $PGR
Progressive Corp Valuation – November 2015 Update $PGR
Ace Limited Valuation – November 2015 Update $ACE
Travelers Companies Inc. Valuation – November 2015 Update $TRV
Lincoln National Corp Valuation – November 2015 Update $LNC
Unum Group Valuation – November 2015 Update $UNM

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.

Aflac Inc. Analysis – September 2015 Update $AFL

In the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.

We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.

In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  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.  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 specific look at how Aflac Inc. (AFL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Aflac Incorporated (Aflac) is a business holding company. The Company is engaged in supplemental health and life insurance, which is marketed and administered through its subsidiary, American Family Life Assurance Company of Columbus (Aflac). Aflac offers insurance policies in Japan and the United States that provide a layer of financial protection against income and asset loss. Aflac’s insurance business consists of two segments: Aflac Japan and Aflac U.S. Aflac Japan sells voluntary supplemental insurance products, including cancer plans, medical indemnity plans, medical/sickness riders, care plans, living benefit life plans, ordinary life insurance plans and annuities. Aflac U.S. sells 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.
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To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of AFL – September 2015

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 $24,838,156,494 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 113.29% Pass
5. Moderate PEmg Ratio PEmg < 20 9.52 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.47 Pass
Score
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

AFL value Chart September 2015

EPSmg $6.07
MG Growth Estimate 8.23%
MG Value $151.52
Opinion Undervalued
MG Value based on 3% Growth $88.04
MG Value based on 0% Growth $51.61
Market Implied Growth Rate 0.51%
Current Price $57.79
% of Intrinsic Value 38.14%

Aflac Inc. qualifies for both the Defensive Investor and the Enterprising Investor.  The company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong fundamentals.  As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.92 in 2011 to an estimated $6.07 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.51% 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.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Aflac Inc. (AFL)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

AFL Charts September 2015

Graham Number $70.80
PEmg 9.52
PB Ratio 1.47
Dividend Yield 2.66%
Number of Consecutive Years of Dividend Growth 20

 

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Long-Term Debt $5,425,000,000
Total Assets $115,581,000,000
Intangible Assets $0
Total Liabilities $98,563,000,000
Shares Outstanding (Diluted Average) 434,257,000

Earnings Per Share History

Next Fiscal Year Estimate $5.68
Dec14 $6.50
Dec13 $6.76
Dec12 $6.11
Dec11 $4.18
Dec10 $4.95
Dec09 $3.19
Dec08 $2.62
Dec07 $3.31
Dec06 $2.95
Dec05 $2.92
Dec04 $2.52
Dec03 $1.52
Dec02 $1.55
Dec01 $1.28
Dec00 $1.26
Dec99 $1.04
Dec98 $0.88
Dec97 $1.04
Dec96 $0.68
Dec95 $0.58

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $6.07
Dec14 $6.08
Dec13 $5.59
Dec12 $4.74
Dec11 $3.92
Dec10 $3.66
Dec09 $3.01
Dec08 $2.90
Dec07 $2.91
Dec06 $2.57
Dec05 $2.24
Dec04 $1.81
Dec03 $1.41
Dec02 $1.31
Dec01 $1.16
Dec00 $1.06
Dec99 $0.92

Recommended Reading:

Other ModernGraham posts about the company

10 Companies Benjamin Graham Would Invest In Today – September 2015
10 Low PE Stocks for the Defensive Investor – August 2015
10 Most Undervalued Companies for the Defensive Investor – August 2015
5 Low PE Stocks for the Defensive Investor – July 2015
The 6 Best Stocks For Value Investors This Week – 6/13/15

Other ModernGraham posts about related companies

Marsh & McLennan Companies Analysis – September 2015 Update $MMC
Berkshire Hathaway Analysis – August 2015 Update $BRK/B
Progressive Corporation Analysis – August 2015 Update $PGR
Ace Limited Analysis – August 2015 Update $ACE
Travelers Companies Analysis – August 2015 Update $TRV
Lincoln National Corporation Analysis – August 2015 Update $LNC
Unum Group Analysis – August 2015 Update $UNM
Principal Financial Group Analysis – August 2015 Update $PFG
Assurant Inc. Analysis – August 2015 Update $AIZ
Arthur J Gallagher & Company Analysis – Initial Coverage $AJG

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 review our detailed disclaimer.

Aflac Inc. Analysis – June 2015 Update $AFL

500px-Aflac.svgAflac Inc. (AFL) currently yields about a 2.5% dividend, and has grown its earnings well over the last few years. Recently, multiple analysts have focused on qualitative factors when reviewing the company. For example, Sure Dividend recently considered the effects of the Japanese economy may have on the company’s bottom line, a factor also analyzed by Casey Hoerth. Meanwhile, Eli Inkrot reviewed the benefits of reinvesting dividends in Aflac. These are great factors to consider in the final stages of an investment decision, but first one must use quantitative metrics to determine the company’s intrinsic value.

Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using the ModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

AFL Chart

AFL data by YCharts

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To read the rest of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.
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Defensive Investor – Must pass all 6 of the following tests: Score = 6/6

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Earnings Stability – Positive earnings per share for at least 10 straight years – PASS
  3. Dividend Record – Has paid a dividend for at least 10 straight years – PASS
  4. Earnings Growth – Earnings per share has increased by at least 1/3rd over the last 10 years, using 3-year averages at the beginning and end of the period – PASS
  5. Moderate PEmg (price over normalized earnings) Ratio – PEmg is less than 20 – PASS
  6. Moderate Price-to-Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – Must pass all 3 of the following tests or be suitable for a Defensive Investor: Score = 3/3

  1. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  2. Dividend Record – Currently pays a dividend – PASS
  3. Earnings Growth – EPSmg greater than that 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $62.69
MG Value $157.61
MG Opinion Undervalued
Value Based on 3% Growth $88.86
Value Based on 0% Growth $52.09
Market Implied Growth Rate 0.87%
PEmg 10.23
PB Ratio 1.48

Balance Sheet – March 2015

Total Debt $6,282,000,000
Total Assets $121,401,000,000
Total Liabilities $102,764,000,000
Outstanding Shares 439,900,000

Earnings Per Share

2015 (estimate) $5.86
2014 $6.50
2013 $6.76
2012 $6.11
2011 $4.12
2010 $4.92
2009 $3.19
2008 $2.62
2007 $3.31
2006 $2.95
2005 $2.92

Earnings Per Share – ModernGraham

2015 (estimate) $6.13
2014 $6.07
2013 $5.58
2012 $4.72
2011 $3.89
2010 $3.65

Dividend History

AFL Dividend Chart

AFL Dividend data by YCharts

Conclusion

Aflac passes the initial requirements of both the Defensive Investor and the Enterprising Investor. In fact, the company passes every requirement of both investor types, which is a rare accomplishment indicative of the company’s strong financial position. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $3.89 in 2011 to an estimated $6.13 for 2015. This is a fairly strong level of demonstrated growth, and outpaces the market’s implied estimate for annual earnings growth of only 0.87% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has averaged around 11.5% annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that Aflac is significantly undervalued at the present time.

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.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

[/level-mg-stocks-screens-subscriber]

Aflac Inc. Quarterly Valuation – March 2015 $AFL

500px-Aflac.svg

Aflac Inc. passes all of the initial requirements of both the Defensive Investor and the Enterprising Investor, which is a rare accomplishment indicative of the company’s strong financial position. As a result, all value investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to valuation, it is critical to consider the company’s earnings history. In this case, the company has grown its EPSmg (normalized earnings) from $3.65 in 2010 to $6.07 for 2014. This is a strong level of demonstrated growth, which is well above the market’s implied estimate for earnings growth of only 0.78% over the next 7-10 years. In fact, the historical growth is around 13.23% per year, so the market is expecting a very significant drop in earnings growth. The ModernGraham valuation model reduces the historical growth to a more conservative figure, assuming that some slowdown will occur, but still returns an estimate of intrinsic value falling above the current price, indicating the company is undervalued at the present time.

Be sure to check out previous ModernGraham valuations of Aflac Inc. (AFL) for a greater perspective!

Read the full valuation on Seeking Alpha!

AFL Chart

AFL data by YCharts

Disclaimer: The author did not hold a position in Aflac Inc. (AFL) at the time of publication and had no intention of changing that position within the next 72 hours. Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Aflac Inc. Quarterly Valuation – December 2014 $AFL

500px-Aflac.svg

Aflac performs extremely well in the initial stages of the analysis, passing all of the requirements of both the Enterprising Investor and the Defensive Investor. Any value investor following the ModernGraham approach based on Benjamin Graham’s teachings should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

To determine an estimate of the intrinsic value, one must consider the company’s earnings. Here, the company has grown its EPSmg (normalized earnings) from $3.65 in 2010 to an estimated $5.95 for 2014. This is a strong level of growth, approximately 12.55% each year. Even adjusting for a margin of safety to assume the company will not do as well in the future, a conservative growth estimate may be around 9.42%, which is well above the market’s implied forecast of only 0.74% earnings growth over the next 7-10 years. The company would have to see a significant slowdown in growth in order to be valued at the market’s current price. As a result, the ModernGraham valuation model returns an estimate of intrinsic value well above the price, supporting a clear conclusion that the company is significantly undervalued. All value investors are therefore encouraged to proceed with further research to determine whether Aflac is suitable for their own individual portfolios.

Be sure to check out previous ModernGraham valuations of Aflac Inc. (AFL) for a greater perspective!

Read the full valuation on Seeking Alpha!

AFL Chart

AFL data by YCharts

Disclaimer:  The author did not hold a position in Aflac Inc. (AFL) or in any other company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Aflac Inc. Quarterly Stock Valuation – September 2014 $AFL

500px-Aflac.svgIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  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.  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 specific look at how Aflac Inc. (AFL) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Aflac Incorporated (Aflac) is a general business holding company and acts as a management company, overseeing the operations of its subsidiaries by providing management services. Its business is supplemental health and life insurance, through its subsidiary, American Family Life Assurance Company of Columbus, which operates in the United States and as a branch in Japan. Aflac’s insurance business consists of two segments: Aflac Japan and Aflac U.S. 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 voluntary supplemental insurance products including loss-of-income products and products designed to protect individuals from depletion of assets (hospital indemnity, fixed-benefit dental, vision care, accident, cancer, critical illness/ critical care, and hospital intensive care plans).
AFL Chart

AFL data by YCharts

Defensive Investor – must pass all 6 of the following tests: Score = 6/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years - PASS
  3. Dividend Record – has paid a dividend for at least 10 straight years - PASS
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period - PASS
  5. Moderate PEmg ratio – PEmg is less than 20 - PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago - PASS

Valuation Summary

Key Data:

Recent Price $61.21
MG Value $161.89
MG Opinion Undervalued
Value Based on 3% Growth $86.26
Value Based on 0% Growth $50.56
Market Implied Growth Rate 0.89%
PEmg 10.29
PB Ratio 1.58

Balance Sheet – 6/30/2014

Total Debt $4,925,000,000
Total Assets $127,871,000,000
Total Liabilities $110,313,000,000
Outstanding Shares 452,950,000

Earnings Per Share

2014 (estimate) $6.11
2013 $6.76
2012 $6.11
2011 $4.18
2010 $4.95
2009 $3.19
2008 $2.62
2007 $3.31
2006 $2.96
2005 $2.92
2004 $2.52

Earnings Per Share – ModernGraham 

2014 (estimate) $5.95
2013 $5.59
2012 $4.74
2011 $3.92
2010 $3.66
2009 $3.01

Dividend History

AFL Dividend Chart

AFL Dividend data by YCharts

Conclusion:

Aflac Inc. qualifies for both the Defensive Investor and the Enterprising Investor.  In fact, the company satisfies all of the requirements of both investor types, which is a rare accomplishment.  As a result, value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $3.66 in 2010 to an estimated $5.95 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 0.89% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price.

Be sure to check out the previous ModernGraham valuations of Aflac Inc. (AFL) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Aflac Inc. (AFL)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Aflac Inc. (AFL) or in any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

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