Yahoo Finance At $8.01, Is Insurance Australia Group Limited (ASX:IAG) A Buy?
Insurance Australia Group Limited (ASX:IAG) received a lot of attention from a substantial price movement on the ASX over the last few months, increasing to A$8.4 at one point, and dropping to the lows of A$7.45. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether Insurance Australia Group’s current trading price of A$8.01 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Insurance Australia Group’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for Insurance Australia Group
Is Insurance Australia Group still cheap?
According to my valuation model, the stock is currently overvalued by about 22%, trading at AU$8.01 compared to my intrinsic value of A$6.58. This means that the buying opportunity has probably disappeared for now. Another thing to keep in mind is that Insurance Australia Group’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 does the future of Insurance Australia Group look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, with a negative profit growth of -3.27% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Insurance Australia Group. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? If you believe IAG is currently trading above its value, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the uncertainty from negative growth in the future, this could be the right time to de-risk your portfolio. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on IAG for some time, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Insurance Australia Group. You can find everything you need to know about Insurance Australia Group in the latest infographic research report. If you are no longer interested in Insurance Australia Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
