Unum (UNM) at 52-Week Highs — Can It Keep Going?

On Monday, Unum Group’s (NYSE: UNM) stock price reached a new all-time high of $59.44 UNM is a diversified insurance provider, with a robust portfolio of disability, life, accident, critical illness, and even dental and vision insurance.

Currently, the stock is up +29.23% YTD. What’s driving the positive price action? Most of the recent move may be attributed to an impressive Q2 2024 earnings call on July 30, which also included the announcement of a $1 billion stock buyback announcement.

UNUM YTD price chart, courtesy TradingView

However, UNM may still have significant upside potential. Let’s take a closer look at some metrics:

• UNM is trading at a P/E of 8.7x — compared to the market average of 25.7x and the insurance industry average of 15.64x.
• UNM is good value based on its Price to Earnings and rate of earnings growth, measured by PEG ratio (0.73x).
• In the past five years, UNM's earnings have grown faster (22.46% per year) than the US Insurance - Life industry average (0.15%).
• UNM is forecast to generate higher Return on Assets (3.19%) than the US Insurance - Life industry average (2.22%).
• UNM's revenues are forecast to grow faster (3.16% per year) than the US Insurance - Life industry average (2.03%).
• The company’s dividends are in the top 75% of all US-listed companies, have increased over the past 10 years, and currently stand at a yield of 2.55%

Putting the picture together, we have a stock trading at what appears to be an extreme discount, which has nonetheless managed to routinely (and significantly) outperform peers over the medium and short term.

The last two quarters saw EPS beats of 6.93% and 7.61% respectively. The last quarter is of particular note — insurance companies tend to make a lot of their money through fixed-income investments, and although the Fed is currently taking dovish moves, the higher rate environment lead to an overall core premium growth of 5.4%.

On top of that, group life (the category encompassing workplace insurance) was a standout — with operating earnings rising by 73% together with a premium increase of 7%.

This has not gone unnoticed by analysts — of the 8 equity researchers tracking the stock, 7 rate it a Strong Buy and one rates it a Hold, for a Strong Buy consensus.

The average price forecast for UNM a year from now is $66 — which would represent an increase of 11.04%. However, some analysts, such as Barclays’ Alex Scott see stock going as high as $73 for a 22.81% increase.

In his analysis dated September 27th, John Barnidge of Piper Sandler said that he expects the company to maintain rising return performance even as interest rates drop, noting that the company receives far less revenue from net investment income than almost all of its competitors, as well as the business’ reasonable valuation.

We won’t have to wait too long to find out, however — the next earnings call is due October 29th — so mark it in your calendars and add the stock to your watchlist.

—> Click here to research UNM. You can also check out our 52-week high-stock screener to find other stocks on an upward trajectory.

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