Unum Group has been treading water for the past six months, recording a small loss of 2.4% while holding steady at $71.99. The stock also fell short of the S&P 500’s 3.1% gain during that period.
Is now the time to buy Unum Group, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
We’re sitting this one out for now. Here are three reasons we avoid UNM and a stock we’d rather own.
When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.
Unum Group’s net premiums earned has grown at a 2.9% annualized rate over the last five years, much worse than the broader insurance industry and in line with its total revenue.
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Unum Group’s revenue to drop by 4.9%, a decrease from its 3% annualized growth for the past two years. This projection doesn’t excite us and suggests its products and services will face some demand challenges.
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Unum Group’s weak 3% annual EPS growth over the last two years aligns with its revenue trend. This tells us it maintained its per-share profitability as it expanded.
Unum Group doesn’t pass our quality test. With its shares trailing the market in recent months, the stock trades at 1× forward P/B (or $71.99 per share). This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better stocks to buy right now. Let us point you toward one of our all-time favorite software stocks.
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