Yahoo Finance At UK£4.02, Is It Time To Put Aviva plc (LON:AV.) On Your Watch List?
Let's talk about the popular Aviva plc (LON:AV.). The company's shares saw a double-digit share price rise of over 10% in the past couple of months on the LSE. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Aviva’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for Aviva
Is Aviva still cheap?
Good news, investors! Aviva is still a bargain right now. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Aviva’s ratio of 6.83x is below its peer average of 13.74x, which suggests the stock is undervalued compared to the Insurance industry. Another thing to keep in mind is that Aviva’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What kind of growth will Aviva generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -9.8% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Aviva. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although AV. is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. I recommend you think about whether you want to increase your portfolio exposure to AV., or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on AV. for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Aviva. You can find everything you need to know about Aviva in the latest infographic research report. If you are no longer interested in Aviva, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
