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Is Aflac's PE Too High ?

|Includes: Aflac Incorporated (AFL)

We decided to do a nearly eleven year study of the Price to Earnings Ratio for AFL.  The earnings information was gleaned from the 10-Qs and 10-Ks.  The split-adjusted closing stock prices were gathered from Yahoo's historical stock database.

We did a four rolling quarter study, meaning that we totaled four quarters of earnings for Q1 thru Q4,  Q2 thru Q1 of the subsequent year, Q3 thru Q2 of the subsequent year,  and Q4 thru Q3 of the subsequent year.  We also averaged the split-adjusted closing stock prices for the same rolling four quarters.  This gives us 43 sets of data.

The highest PE using this method is 22.22 for the rolling four quarters of Q3-2000 through Q2-2001.  The lowest is 10.52 for the calendar year 2009.  The most recent PE is 11.52 for the rolling four quarters of Q3-2009 through Q2-2010, with an average closing stock price during this period of $44.71 and a net earnings per share of $3.88.  The average PE for the 43 sets of data is 16.21.


The graph above shows the PEs relative to the average for the past almost eleven years.  Based on this PE graph I do not believe that Aflac is currently overvalued.

Dividends: Since January 1996 Aflac has paid $6.17 in dividends, with another $0.28 coming on September 1.  Over the past ten years the dividend has been increased by more than 500%;

Disclosure: I am long AFL.