Do you consider yourself a value investor, always looking for potentially undervalued opportunities? We ran a screen with that idea in mind.
We screened the life insurance industry for stocks that appear undervalued relative to their cash flows, indicated by high ratios of levered free cash flow/enterprise value.
Levered free cash flow is the free cash flow after deducting interest payments on outstanding debt. Enterprise value is the sum of the firm's value from all ownership sources: market cap, outstanding debt, and preferred shares. When companies have ratios of levered free cash flow/enterprise value in excess of 10%, it may indicate that the company as a whole is being undervalued.
For an interactive version of this chart, click on the image below. Market cap data sourced from Zacks Investment Research.
click for interactive chart
Do you think these stocks should be trading higher? Use this list as a starting point for your own analysis.
List sorted by LFCF/EV.
1. Kansas City Life Insurance Company (KCLI): Operates as a financial services company that primarily focuses on the sale and administration of life and annuity insurance products in the United States. Market cap at $398.71M, most recent closing price at $36.05. Levered free cash flow at $87.96M vs. enterprise value at $381.33M (implies a LFCF/EV ratio at 23.07%).
2. National Western Life Insurance Company (NWLI): Provides life insurance products for the savings and protection needs of policyholders and annuity contracts for the asset accumulation and retirement needs of contract holders. Market cap at $508.16M, most recent closing price at $139.99. Levered free cash flow at $97.42M vs. enterprise value at $428.47M (implies a LFCF/EV ratio at 22.74%).
3. Torchmark Corp. (TMK): Provides individual life and supplemental health insurance products, and annuities to middle income households. Market cap at $4.9B, most recent closing price at $51.37. Levered free cash flow at $1.22B vs. enterprise value at $6.06B (implies a LFCF/EV ratio at 20.13%).
*LFCF/EV data sourced from Yahoo! Finance, all other data sourced from Finviz.