After a 12% drop for the 52 weeks through Sept. 7, American International Group Inc. (AIG, Financial), the multinational finance and insurance corporation, is trading more affordably, as is illustrated in the chart by GuruFocus.
The share price is plainly below the 200-day simple moving average line and on par with the 50- and 100-SMA lines. The market capitalization is $47.68 billion on the New York Stock Exchange. The current share price is also 7.3% below the middle of the 52-week range of $49.57 to $65.55.
The price-book ratio is 0.78, versus an industry median of 1.25, and the price-sales ratio is 1.03, versus an industry median of 1.04.
AIG Inc. has been distributing dividends to its shareholders for more than 30 years. The company is currently paying a cash quarterly dividend of 32 cents. If held constant, this leads to a forward dividend of $1.28, yielding 2.38%. That is below the industry median of 4% but higher than the S&P 500 index current dividend yield of 1.78%.
As of September, 19 analysts were surveyed on AIG. Ten analysts recommended buying shares, and seven analysts suggested holding. One analyst predicted an underperforming stock, while another analyst suggested to sell. The recommendation rating is 2.2 out of 5.
The average target price is $62 per share, representing nearly 16% growth from current valuations.
AIG operates in over 80 countries worldwide and employs 56,400 people. The business is structured in two main segments: the general insurance segment and the life and retirement segment. The company offers a broad range of annuities and insurance products for individuals, families, businesses and enterprises. AIG also provides its clients with investment solutions. The company manages a portfolio of clients in the U.S., Europe and Japan through a dense sales network.
The company is a component of the S&P 100 and of the S&P 500.
AIG closed full fiscal 2017 with revenue of $49.52 billion, operating income of $2.63 billion and a net loss of $6.06 billion.
GuruFocus has assigned a profitability & growth rating of 4 out of 10. That is not one of the highest in the industry and is mainly a result of declining sales and a trailing 12-month net profit margin of -13.65%
The trailing 12-month revenues have been trending downward since 2010 and over the last five years, they have recorded a 7.5% annual average decline.
For the third quarter of fiscal 2018, the average analyst predicts earnings per share of $1.15 on revenue of $12.31 billion. Compared to a year ago, the prediction on the bottom line is a positive turnaround from a net loss of $1.22 per share. The estimate on the top line represents a 4.7% increase.
The tight monetary policy from the Federal Reserve, which is expected to raise rates three times between the remainder of 2018 and 2019, should improve the net profit margin of the company.
In fact, analysts are also predicting that AIG will grow its net earnings 91.9% in the current year, 20.7% next year and at annual average growth rate of 34.55% over the next five years.
GuruFocus has assigned a low financial strength rating of 3 out of 10. The low score for the rating is essentially a result of a trailing 12-month return on invested capital of -23.68%, which is not matching up to the cost of capital. The cost of capital of AIG is measured by a WACC (weighted average cost of capital) of 5.80%. A debt-to-Ebitda ratio of 5.31 versus an industry median of 1.26 is also weighing on GuruFocus’ assessment of the company’s financial strength.
AIG is reporting 888.45 million shares outstanding, of which 71.20% is held by institutions and 1.87% is held by insiders.
The following are the top fund holders: Capital Research Global Investors holds 6.2% of shares outstanding, Harris Associates LP owns 4.21% of shares outstanding and Hotchkis & Wiley holds 2.2% of shares outstanding.
Disclosure: I have no positions in any security mentioned in this article.
