Over the past six months, MetLife’s stock price fell to $77.68. Shareholders have lost 10.7% of their capital, which is disappointing considering the S&P 500 has climbed by 5%. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Is there a buying opportunity in MetLife, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Do We Think MetLife Will Underperform?
Even with the cheaper entry price, we're swiping left on MetLife for now. Here are three reasons why we avoid MET and a stock we'd rather own.
1. Declining Net Premiums Earned Reflects Weakness
Our experience and research show the market cares primarily about an insurer’s net premiums earned growth as investment and fee income are considered more susceptible to market volatility and economic cycles.
MetLife’s net premiums earned has declined by 1.1% annually over the last two years, much worse than the broader insurance industry. This shows that policy underwriting underperformed its other business lines.
2. EPS Barely Growing
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
MetLife’s EPS grew at a weak 4.4% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 2.2% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
3. Declining BVPS Reflects Erosion of Asset Value
For insurers, book value per share (BVPS) is a vital measure of financial health, representing the total assets available to shareholders after accounting for all liabilities, including policyholder reserves and claims obligations.
Disappointingly for investors, MetLife’s BVPS declined at a 1.2% annual clip over the last two years.
Final Judgment
MetLife falls short of our quality standards. Following the recent decline, the stock trades at 2× forward P/B (or $77.68 per share). This valuation tells us a lot of optimism is priced in - you can find more timely opportunities elsewhere. Let us point you toward a dominant Aerospace business that has perfected its M&A strategy.
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