3 Life Insurance Stocks Undervalued By The Graham Number

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 |  Includes: LNC, PRI, TMK
by: Kapitall

Do you like searching for attractively priced stocks? We ran a screen on the life insurance industry with this idea in mind.

We screened the financial sector for life insurance stocks, and then screened for those that also appear undervalued relative to the Graham Number. The Graham Number is a measure of maximum fair value created by the "godfather of value investing" Benjamin Graham.

It is based off of a stock's EPS and book value per share (BVPS).

Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)

The equation assumes that P/E should not be higher than 15 and P/BV should not be higher than 1.5. Stocks trading well below their Graham Number may be undervalued.

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

Tool provided by Kapitall (kapitall.com).

Do you think these insurers are undervalued? Use this list as a starting point for your own analysis.

List sorted by potential upside implied by the Graham Number.

1. Torchmark Corp. (NYSE:TMK): Provides individual life and supplemental health insurance products, and annuities to middle income households. Market cap at $4.72B, most recent closing price at $47.98. Diluted TTM earnings per share at 5.08, and a MRQ book value per share value at 38.6, implies a Graham Number fair value = sqrt(22.5*5.08*38.6) = $66.42. Based on the stock's price at $48.32, this implies a potential upside of 37.46% from current levels.

2. Primerica, Inc. (NYSE:PRI): Engages in the distribution of financial products on behalf of third parties to middle income households in the United States and Canada. Market cap at $1.53B, most recent closing price at $25.50. Diluted TTM earnings per share at 2.36, and a MRQ book value per share value at 21.24, implies a Graham Number fair value = sqrt(22.5*2.36*21.24) = $33.58. Based on the stock's price at $25.5, this implies a potential upside of 31.7% from current levels.

3. Lincoln National Corp. (NYSE:LNC): Engages in multiple insurance and retirement businesses in the United States. Market cap at $6.05B, most recent closing price at $21.21. Diluted TTM earnings per share at 0.72, and a MRQ book value per share value at 46.46, implies a Graham Number fair value = sqrt(22.5*0.72*46.46) = $27.43. Based on the stock's price at $21.23, this implies a potential upside of 29.23% from current levels.

*BVPS and EPS data sourced from Yahoo! Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.