MetLife Still Has Plenty Of Upside

| About: MetLife, Inc. (MET)
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Last month I bought some shares of MetLife (NYSE:MET) as I saw the great potential in this company. After the company beat estimates by a large margin last quarter, its stock price plunged. While MetLife's exposure to Europe was limited (90% of the company's investment in Europe are on bonds of investment grade), Europe was the main reason for the sharp drop of the stock price. I bought MET when it was trading for $30.00 a share, and it is currently trading at $35.75 a share. Should I sell my shares and lock in the profit? My answer is "no" based on the following analyses.

Stock Price vs. Book Value: As you can see in the chart below, up until fall of 2008, MetLife's stock price and book value were perfectly aligned. After the bankruptcy of Lehman Brothers in 2008, MetLife's stock price took a beating along with many other companies at the time. After early 2009, the stock price started to recover but the price would not climb up as fast as the book value of the company would. Starting in 2011, the gap between MetLife's stock price and book value started to get wider and wider. Since 2002, the company's book value is up by 300% whereas its stock price is up by only 21%. There is a lot of catching up for the stock price to do.

Currently MetLife's stocks trade for lower than the book value.

Stock Price vs. Cash: Again, up until 2008, the company's stock price and available cash was aligned together except for the spike in the company's cash in 2005. After 2008, the two metrics got "decoupled" and stock price stopped reflecting the cash MetLife is holding. Since 2002, the company's cash is up by 149% whereas its stock price is only up by 21%.

Stock Price vs. Earnings Per Share: In 2005, 2007, 2010 and 2011 the company's EPS spiked up more than usual due to its success in derivatives. The gains in derivatives are hard to analyze because they are very unpredictable. However, I should note that the company's EPS growth beat its capital growth in almost every quarter since 2002.

Stock Price vs. Revenue: From 2009 to early 2011, the company's stock price and revenue paralleled each other, however after 2011, the two metrics went opposite ways. As the company's revenue kept growing, its stock price kept plunging.

Also, MetLife's P/E ratio of 6.93 is an all time low for the company.

I think this is a great company with great potential. Last quarter the company's international sales were up by 25%. For example, in Japan, a country that slid back to recession after the earthquake, the company's sales grew by 28% year-to-year. The company expects to see a growth of 3% in US, 14% in international markets (excluding Japan) and 21% in Japan in 2012. In total, 20 analysts have an average price target of $46.70 per share on MetLife (with 7 buy, 9 outperform and 4 hold ratings) which means the stock still has plenty of upside potential.

Disclosure: I am long MET.