Here is my take on AIG (I own AIG.ws so far).
- My overall conviction: May wait for one quarter to see whether its earnings will improve or not. Bad ROE justifies its low valuation.
- Summary from Gorufocus manual of stock (NYSE_AIG_Gurufocus)
- Valuation: tangible book value is $80.62, FCF proce is $84.29, 5 year median P/B value is $58.59.
- Financial strength: weak 3/10, ROIC (-1.95%) is far less than WACC (9.80%)
- Profitability & growth: weak, 4/10, operating margin and net margin are negative and downward trend in the latest 5 years. ROE, ROA are negative. Revenue and EBIDTA go downward, demonstrates weak moat
- Financials: net income trends down to recent negative, FCF trands down to negative, Operating cash flow goes to negative (mostly due to hurricane)
- Combined ration for all division went up and beyond 100%
- Ratios: valuation ratio low P/B = 0.74 vs 5 year median 0.727
- Dividend & Buy back: Div yield is 2.16%, lower than 82% of industry, however, div growth rate us 85.7% which is pretty high. 3 year average share buyback ratio is 12.10% which is higher than 96% of industry
- insider trades: new CEO bought 80000 shares at open market in May 18th
- Guru trades: Barrow, Hanley, Mewhinney & Strauss bought, John Paulson sold out
- possible catalysts:
turn around expert – new CEO; no more hurricane or other natural disasters?
P/B trend
Revenue, NI and YoY EPS growth (%)
Personalized Checklist
| Checklist Items / Related Parameters | |||||
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Within your circle of competence?
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4 | ||||
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Macro economic environment favorable?
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4 | ||||
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High quality business?
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3 | ||||
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Enough margin of safety with stocks?
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Gurus are buying?
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3 | ||||
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Insiders are buying?
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4 | ||||
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Management capable and shareholder friendly?
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4 | ||||
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Catalyst for stock price to appreciate?
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3 | ||||
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Your level of confidence with the research?
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4 | ||||
Checked: 9 / 9 – Total Score: 3.7 / 5
Invest like a guru Checklist
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Do I understand the business?
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4 | ||||
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What is the economic moat that protects the company so it can sell the same or a similar product five or ten years from today?
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2 | ||||
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Is this a fast-changing industry?
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3 | ||||
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Does the company have a diversified customer base?
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4 | ||||
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Is this an asset-light business?
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3 | ||||
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Is it a cyclical business?
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3 | ||||
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Does the company still have room to grow?
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3 | ||||
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Has the company been consistently profitable over the past ten years, through good times and bad?
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1 | ||||
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Does the company have a stable double-digit operating margin?
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1 | ||||
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Does the company have a higher margin than competitors?
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1 | ||||
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Does the company have a return on investment capital of 15% percent or higher over the past decade?
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1 | ||||
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Has the company been consistently growing its revenue and earnings at double digits?
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1 | ||||
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Does the company have a strong balance sheet?
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3 | ||||
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Do company executives own decent shares of stock of the company?
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3 | ||||
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How are the executives paid compared with other similarly sized companies?
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3 | ||||
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Are insiders buying?
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4 | ||||
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Is the stock valuation reasonable as measured by intrinsic value, or P/E ratio?
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4 | ||||
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How is the current valuation relative to historical range?
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4 | ||||
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How did the company’s stock price fare during the previous recessions?
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1 | ||||
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How much confidence do I have in my research?
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4 | ||||
