MetLife stock is estimated at
MetLife (NYSE: MET, 30-year Financials) stock appears to be slightly overvalued, according to GuruFocus Value’s calculation. The GuruFocus Value is GuruFocus’s estimate of the fair value at which the stock is to trade. It is calculated based on the historical multiples at which the stock has traded, the company’s past growth, and analysts’ estimates of the company’s future performance. If a stock’s price is significantly above the GF value line, it is overvalued and its future performance is likely to be poor. On the other hand, if it is significantly below the GF value line, its future return is likely to be higher. At its current price of $ 58.86 per share and market cap of $ 51.5 billion, MetLife stock is showing all signs of modest overvaluation. The GF value for MetLife is shown in the table below.
Because MetLife is relatively overvalued, its long-term stock return is likely to be lower than its business growth, which has averaged 8.7% over the past five years.
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Since investing in companies with poor financial strength could result in a permanent loss of capital, investors should carefully consider the financial strength of a company before deciding whether or not to buy shares. Examining the cash-to-debt ratio and interest coverage can provide a good initial perspective on the financial strength of the business. MetLife has a cash-to-debt ratio of 1.09, which is around the average for companies in the insurance industry. Based on this, GuruFocus ranks MetLife’s financial strength as 4 out of 10, suggesting a poor track record. Here is MetLife’s debt and cash flow for the past several years:
Companies that have historically been profitable over the long term pose less risk to investors who want to buy stocks. Higher profit margins usually dictate a better investment compared to a business with lower profit margins. MetLife has been profitable 10 in the past 10 years. In the past twelve months, the company reported sales of $ 63.5 billion and earnings of $ 1.223 per share. Its operating margin is 0.00%, which ranks it in the bottom 10% of companies in the insurance industry. Overall, MetLife’s profitability is ranked 6 out of 10, indicating reasonable profitability. Here is MetLife’s sales and net income for the past several years:
Growth is probably one of the most important factors in the valuation of a business. GuruFocus research has shown that growth is closely tied to the long-term performance of a company’s stocks. If a company’s business is growing, the business typically creates value for its shareholders, especially if the growth is profitable. Likewise, if the income and profits of a business decrease, the value of the business will decrease. MetLife’s 3-year average revenue growth rate is over 68% for companies in the insurance industry. MetLife’s 3-year average EBITDA growth rate is 22.3%, which is better than 82% of companies in the insurance industry.
Another way to look at the profitability of a business is to compare its return on invested capital and the weighted cost of capital. Return on invested capital (ROIC) measures the extent to which a business generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company should pay on average to all of its security holders to finance its assets. We want to have a return on invested capital greater than the weighted cost of capital. Over the past 12 months, MetLife’s return on invested capital is 0.29 and its cost of capital is 8.34. MetLife’s historical ROIC vs WACC comparison is shown below:
Overall, MetLife (NYSE: MET, 30 Financials) stock gives all indications of being slightly overvalued. The company’s financial situation is bad and its profitability is fair. Its growth ranks better than 82% of companies in the insurance sector. To learn more about the MetLife share, you can view its 30-year financial data here.
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