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GL Stock Plunges 16.7% Year to Date: Should You Hold or Fold?
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Globe Life Inc. (GL - Free Report) shares have lost 16.7% in the year-to-date period against the industry’s 3.8% growth. It has also underperformed the Finance sector’s 12% return and the Zacks S&P 500 composite’s 15% growth in the said time frame.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
GL has been grappling with higher expenses over the past few years. Higher total policyholder benefits, amortization of deferred acquisition costs, commissions, premium taxes and non-deferred acquisition costs, other operating expenses and interest expenses resulted in escalating expenses.
Globe Life has been incurring high administrative expenses over the years. For 2024, GL expects administrative expenses to be approximately 7% of premiums, higher than the 2023 level.
Closing at $101.34 in the last trading session, the stock stands 23% below its 52-week high of $132.
Globe Life’s long-term debt has been increasing over the last few years with debt-to-capital ratio deteriorating. As of June 30, 2024, total debt increased 11% year over year. A high debt level has been inducing higher interest expenses, which also increased in the second quarter of 2024. The company must service its debt uninterruptedly, or else creditworthiness could be dented.
GL Trading Above 50-Day Moving Average
GL closed at $101.34 on Wednesday, above the 50-day simple moving average (SMA) of $93.43, representing an uptrend. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
GL’s Growth Projection
The Zacks Consensus Estimate for Globe Life’s 2024 earnings per share indicates a year-over-year increase of 12%. The consensus estimate for revenues is pegged at $5.82 billion, implying a year-over-year improvement of 5.5%.
The consensus estimate for 2025 earnings per share and revenues indicates an increase of 10.6% and 4.7%, respectively, from the corresponding 2024 estimates.
Earnings of GL grew 12.4% in the last five years, better than the industry average of 5.5%.
Positive Analyst Sentiment Instills Confidence in GL
One of the six analysts covering the stock has raised estimates for 2024 while two analysts have raised estimates for 2025 over the past 30 days. The consensus estimate for 2024 and 2025 earnings indicates an improvement of 0.08% and 0.8%, respectively.
GL’s Return on Capital
GL’s trailing 12-month return on equity is 21.9%, ahead of the industry average of 20.9%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.
Also, the return on invested capital (ROIC) in the trailing 12 months was 13.3%, better than the industry average of 4.6%. Its ROIC has been increasing over the last few quarters amid capital investment made over the same time frame. This reflects the company’s efficiency in utilizing funds to generate income.
Key Drivers of Globe Life
Globe Life has been witnessing a positive trend in revenues, driven by premium growth in its Life Insurance and Health Insurance segments and net investment income.
The strong performance of the American Income and Liberty National divisions should drive the top line in the future. Liberty National is likely to continue to benefit from improved productivity and agent count. GL’s expansion initiatives to capture heavily populated and less penetrated areas should drive growth in the future. Net life sales, as well as net health sales, are expected to grow in the mid-teens for Liberty National.
Moreover, net investment income continues to be another important driver of the company’s top-line growth and has been exhibiting improvement over the last few years. The metric is likely to keep growing, riding on improved invested assets and higher interest rates on new investments.
The company has maintained a strong liquidity position with sufficient cash-generation capabilities. Its operations comprise writing basic protection life and supplemental health insurance policies, which generate strong and stable cash flows. For 2024, Globe Life has targeted a consolidated Company Action Level RBC ratio of 300-320%.
A strong capital position enables Globe Life to enhance its shareholder value via share buybacks and dividend payouts. The insurer has continuously been increasing its dividend over the past eight years (2016-2023) at a CAGR of 6.79%.
GL Shares Are Affordable
Globe Life is trading at a discount compared with the industry average. It presents a compelling investment opportunity with its attractive forward 12-month price-to-book ratio of 7.91X, lower than the industry average of 13.54X. Also, it has a Value Score of A.
Shares of other players from the same space, such as Guild Holdings Company (GHLD - Free Report) , Marex Group PLC (MRX - Free Report) and PRA Group, Inc. (PRAA - Free Report) , are also trading at a discount to the industry average.
Conclusion
While Globe Life witnesses higher expenses, its higher life and health sales, improved invested assets, increased productivity and agent count, strong liquidity position and effective capital deployment could pave the way for recovery and sustained growth. GL should benefit from Higher return on capital, favorable growth estimates and the affordability of the stock. It is, therefore, wise to hold on to this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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GL Stock Plunges 16.7% Year to Date: Should You Hold or Fold?
Globe Life Inc. (GL - Free Report) shares have lost 16.7% in the year-to-date period against the industry’s 3.8% growth. It has also underperformed the Finance sector’s 12% return and the Zacks S&P 500 composite’s 15% growth in the said time frame.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
GL has been grappling with higher expenses over the past few years. Higher total policyholder benefits, amortization of deferred acquisition costs, commissions, premium taxes and non-deferred acquisition costs, other operating expenses and interest expenses resulted in escalating expenses.
Globe Life has been incurring high administrative expenses over the years. For 2024, GL expects administrative expenses to be approximately 7% of premiums, higher than the 2023 level.
Closing at $101.34 in the last trading session, the stock stands 23% below its 52-week high of $132.
Globe Life’s long-term debt has been increasing over the last few years with debt-to-capital ratio deteriorating. As of June 30, 2024, total debt increased 11% year over year. A high debt level has been inducing higher interest expenses, which also increased in the second quarter of 2024. The company must service its debt uninterruptedly, or else creditworthiness could be dented.
GL Trading Above 50-Day Moving Average
GL closed at $101.34 on Wednesday, above the 50-day simple moving average (SMA) of $93.43, representing an uptrend. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
GL’s Growth Projection
The Zacks Consensus Estimate for Globe Life’s 2024 earnings per share indicates a year-over-year increase of 12%. The consensus estimate for revenues is pegged at $5.82 billion, implying a year-over-year improvement of 5.5%.
The consensus estimate for 2025 earnings per share and revenues indicates an increase of 10.6% and 4.7%, respectively, from the corresponding 2024 estimates.
Earnings of GL grew 12.4% in the last five years, better than the industry average of 5.5%.
Positive Analyst Sentiment Instills Confidence in GL
One of the six analysts covering the stock has raised estimates for 2024 while two analysts have raised estimates for 2025 over the past 30 days. The consensus estimate for 2024 and 2025 earnings indicates an improvement of 0.08% and 0.8%, respectively.
GL’s Return on Capital
GL’s trailing 12-month return on equity is 21.9%, ahead of the industry average of 20.9%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.
Also, the return on invested capital (ROIC) in the trailing 12 months was 13.3%, better than the industry average of 4.6%. Its ROIC has been increasing over the last few quarters amid capital investment made over the same time frame. This reflects the company’s efficiency in utilizing funds to generate income.
Key Drivers of Globe Life
Globe Life has been witnessing a positive trend in revenues, driven by premium growth in its Life Insurance and Health Insurance segments and net investment income.
The strong performance of the American Income and Liberty National divisions should drive the top line in the future. Liberty National is likely to continue to benefit from improved productivity and agent count. GL’s expansion initiatives to capture heavily populated and less penetrated areas should drive growth in the future. Net life sales, as well as net health sales, are expected to grow in the mid-teens for Liberty National.
Moreover, net investment income continues to be another important driver of the company’s top-line growth and has been exhibiting improvement over the last few years. The metric is likely to keep growing, riding on improved invested assets and higher interest rates on new investments.
The company has maintained a strong liquidity position with sufficient cash-generation capabilities. Its operations comprise writing basic protection life and supplemental health insurance policies, which generate strong and stable cash flows. For 2024, Globe Life has targeted a consolidated Company Action Level RBC ratio of 300-320%.
A strong capital position enables Globe Life to enhance its shareholder value via share buybacks and dividend payouts. The insurer has continuously been increasing its dividend over the past eight years (2016-2023) at a CAGR of 6.79%.
GL Shares Are Affordable
Globe Life is trading at a discount compared with the industry average. It presents a compelling investment opportunity with its attractive forward 12-month price-to-book ratio of 7.91X, lower than the industry average of 13.54X. Also, it has a Value Score of A.
Shares of other players from the same space, such as Guild Holdings Company (GHLD - Free Report) , Marex Group PLC (MRX - Free Report) and PRA Group, Inc. (PRAA - Free Report) , are also trading at a discount to the industry average.
Conclusion
While Globe Life witnesses higher expenses, its higher life and health sales, improved invested assets, increased productivity and agent count, strong liquidity position and effective capital deployment could pave the way for recovery and sustained growth. GL should benefit from Higher return on capital, favorable growth estimates and the affordability of the stock. It is, therefore, wise to hold on to this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.