MetLife trades at $84.06 per share and has stayed right on track with the overall market, gaining 10.1% over the last six months. At the same time, the S&P 500 has returned 9.7%.
Is now the time to buy MetLife, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Do We Think MetLife Will Underperform?
We're swiping left on MetLife for now. Here are three reasons you should be careful with MET and a stock we'd rather own.
1. Net Premiums Earned Point to Soft Demand
Insurers sell policies then use reinsurance (insurance for insurance companies) to protect themselves from large losses. Net premiums earned are therefore what's collected from selling policies less what’s paid to reinsurers as a risk mitigation tool.
MetLife’s net premiums earned has grown at a 2.7% annualized rate over the last five years, much worse than the broader insurance industry and in line with its total revenue.
2. Projected Revenue Growth Shows Limited Upside
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 MetLife’s revenue to stall, a deceleration versus its 4.8% annualized growth for the past two years. This projection is underwhelming and suggests its products and services will see some demand headwinds.
3. Substandard BVPS Growth Indicates Limited Asset Expansion
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 grew at a sluggish 3% annual clip over the last two years.
Final Judgment
We see the value of companies helping consumers, but in the case of MetLife, we’re out. That said, the stock currently trades at 1.9× forward P/B (or $84.06 per share). This valuation tells us a lot of optimism is priced in - you can find more timely opportunities elsewhere. We’d recommend looking at our favorite semiconductor picks and shovels play.
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