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American Financial Stock Near 52-Week High: What Should Investors Do?
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American Financial Group, Inc. (AFG - Free Report) closed at $136.2 on Thursday, near its 52-week high of $137.95. This proximity underscores investor confidence. It has the ingredients for further price appreciation. The stock is trading above the 50-day and 200-day simple moving average (SMA) of $130.68 and $126.96, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
AFG has a solid surprise history. The property and casualty insurer has a solid track record of beating earnings estimates in two of the last four quarters while missing in the other two, the average being 0.27%.
Shares of this insurer have gained 14.7% year to date compared with the industry’s growth of 27.2% and the Zacks S&P 500 composite’s return of 20%.
YTD Price Performance
Image Source: Zacks Investment Research
American Financial’s Favorable Return on Equity
AFG’s return on equity in the trailing 12 months was 21.1%, better than the industry average of 7.9%, reflecting efficiency in utilizing shareholders’ funds.
AFG’s Growth Projection
The Zacks Consensus Estimate for American Financial’s 2024 earnings per share indicates a year-over-year increase of 3.7%. The consensus estimate for revenues is pegged at $7.74 billion, implying a year-over-year improvement of 2.9%.
The consensus estimate for 2025 earnings per share and revenues indicates a year-over-year increase of 6.7% and 13.6%, respectively, from the corresponding 2024 estimates.
AFG Witnessing Northbound Estimate Revision
The Zacks Consensus Estimate for American Financial’s 2024 and 2025 earnings has moved 0.2% and 0.6% north, respectively, in the past 60 days, reflecting analyst optimism.
Key Points to Note
New business opportunities, increased exposure and a good renewal rate environment, coupled with additional crop premiums from the Crop Risk Services acquisition, poise AFG well for growth.
American Financial, a niche player in the P&C market, is likely to benefit from strategic acquisitions and improved pricing. Improved industry fundamentals drive overall growth.
American Financial witnessed average renewal pricing across the entire P&C Group. It intends to maintain satisfactory rates in P&C renewal pricing going forward. AFG expects to achieve overall renewal rate increases in excess of prospective loss ratio trends to meet or exceed targeted returns.
Its combined ratio has been better than the industry average for more than two decades. Specialty niche focus, product line diversification and underwriting discipline should help AFG outperform the industry’s underwriting results.
Wealth Distribution
The insurer has increased its dividend for 18 straight years apart from paying special dividends occasionally. This reflects its financial stability, which stems from robust operating profitability in the P&C segment, stellar investment performance and effective capital management.
The insurer expects its operations to continue to generate significant excess capital throughout the remainder of 2024, thus providing ample opportunity for additional share repurchases or special dividends over the next year. Notably, the 10-year compound annual growth rate for the company's regular annual dividends stands at an impressive 12.4%. This track record underscores its prudent financial management and stability. The dividend yield is 2%, better than the industry average of 0.2%.
AFG’s dividend yield betters other industry players like Cincinnati Financial Corporation (CINF - Free Report) , The Travelers Companies, Inc. (TRV - Free Report) and RLI Corp. (RLI - Free Report) .
Risks for AFG
Based on the forward 12-month price-to-book ratio, AFG is currently trading at 2.61X, above its 2.48X five-year median and industry average of 1.60X. Hence, the stock is overvalued.
The earnings of American Financial have traditionally been affected by catastrophes. Even drought, which does not otherwise qualify as a catastrophe, had affected its earnings, given its exposure to the crop business.
American Financial has been experiencing an increase in expenses due to higher P&C insurance losses & expenses, annuity, life, accident & health benefits & expenses that weigh on margin expansion.
To Conclude
American Financial’s prudent capital deployment, increased exposures, good renewal rate environment and improved combined ratio make it an attractive stock.
Despite its expensive valuation, American Financial should benefit from strategic acquisitions, new business opportunities, stronger underwriting profit and favorable growth estimates. 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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American Financial Stock Near 52-Week High: What Should Investors Do?
American Financial Group, Inc. (AFG - Free Report) closed at $136.2 on Thursday, near its 52-week high of $137.95. This proximity underscores investor confidence. It has the ingredients for further price appreciation. The stock is trading above the 50-day and 200-day simple moving average (SMA) of $130.68 and $126.96, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
AFG has a solid surprise history. The property and casualty insurer has a solid track record of beating earnings estimates in two of the last four quarters while missing in the other two, the average being 0.27%.
Shares of this insurer have gained 14.7% year to date compared with the industry’s growth of 27.2% and the Zacks S&P 500 composite’s return of 20%.
YTD Price Performance
Image Source: Zacks Investment Research
American Financial’s Favorable Return on Equity
AFG’s return on equity in the trailing 12 months was 21.1%, better than the industry average of 7.9%, reflecting efficiency in utilizing shareholders’ funds.
AFG’s Growth Projection
The Zacks Consensus Estimate for American Financial’s 2024 earnings per share indicates a year-over-year increase of 3.7%. The consensus estimate for revenues is pegged at $7.74 billion, implying a year-over-year improvement of 2.9%.
The consensus estimate for 2025 earnings per share and revenues indicates a year-over-year increase of 6.7% and 13.6%, respectively, from the corresponding 2024 estimates.
AFG Witnessing Northbound Estimate Revision
The Zacks Consensus Estimate for American Financial’s 2024 and 2025 earnings has moved 0.2% and 0.6% north, respectively, in the past 60 days, reflecting analyst optimism.
Key Points to Note
New business opportunities, increased exposure and a good renewal rate environment, coupled with additional crop premiums from the Crop Risk Services acquisition, poise AFG well for growth.
American Financial, a niche player in the P&C market, is likely to benefit from strategic acquisitions and improved pricing. Improved industry fundamentals drive overall growth.
American Financial witnessed average renewal pricing across the entire P&C Group. It intends to maintain satisfactory rates in P&C renewal pricing going forward. AFG expects to achieve overall renewal rate increases in excess of prospective loss ratio trends to meet or exceed targeted returns.
Its combined ratio has been better than the industry average for more than two decades. Specialty niche focus, product line diversification and underwriting discipline should help AFG outperform the industry’s underwriting results.
Wealth Distribution
The insurer has increased its dividend for 18 straight years apart from paying special dividends occasionally. This reflects its financial stability, which stems from robust operating profitability in the P&C segment, stellar investment performance and effective capital management.
The insurer expects its operations to continue to generate significant excess capital throughout the remainder of 2024, thus providing ample opportunity for additional share repurchases or special dividends over the next year. Notably, the 10-year compound annual growth rate for the company's regular annual dividends stands at an impressive 12.4%. This track record underscores its prudent financial management and stability. The dividend yield is 2%, better than the industry average of 0.2%.
AFG’s dividend yield betters other industry players like Cincinnati Financial Corporation (CINF - Free Report) , The Travelers Companies, Inc. (TRV - Free Report) and RLI Corp. (RLI - Free Report) .
Risks for AFG
Based on the forward 12-month price-to-book ratio, AFG is currently trading at 2.61X, above its 2.48X five-year median and industry average of 1.60X. Hence, the stock is overvalued.
The earnings of American Financial have traditionally been affected by catastrophes. Even drought, which does not otherwise qualify as a catastrophe, had affected its earnings, given its exposure to the crop business.
American Financial has been experiencing an increase in expenses due to higher P&C insurance losses & expenses, annuity, life, accident & health benefits & expenses that weigh on margin expansion.
To Conclude
American Financial’s prudent capital deployment, increased exposures, good renewal rate environment and improved combined ratio make it an attractive stock.
Despite its expensive valuation, American Financial should benefit from strategic acquisitions, new business opportunities, stronger underwriting profit and favorable growth estimates. 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.