Genworth Financial Valuation

Genworth Financial is a global financial security company operating in 25 different countries with over 15 million customers. Genworth Financial provides long-term care insurance, individual and group annuities, investment products, wealth management, protection insurance and lenders mortgage insurance.

As U.S housing continues to recover, Genworth Financial is in a dominant position to rebound with it. As low interest rates continue to eat away at revenue and bottom line profit for the company, Genworth continues to make up for it particularly in international protection and mortgage lending insurance, swinging to a profit in the most recent quarter. GNW has expressed concern for the on-going future and is continuing to raise the capital requirement ratio. GNW is looking to sell-off the wealth management division, IPO the Australian mortgage unit before the end of 2013, and find a full time CEO, all of which are catalyst in the near future. Genworth has also recently announced they will be increasing insurance pricing in 2013. GNW has been beaten down severely since the 2008-2009 crisis and is trading well below the book value per share. GNW has fairly impressive fundamentals, some I will examine below.

Current Share Price: $5.65

P/E Ratio: 7.5

Price to Book: 0.2

Price to Sales: 0.3

Price to Cashflow: 1.8

Forward P/E: 4.4

Book Value Per Share: $33.40 or $22.78 excluding accumulated comprehensive income

14.71 Billion in Shareholder Equity (excluding goodwill) vs. 2.78 Billion Market Cap (At closing price of 5.65 x 491.83 million shares)

As retained earnings and shareholder equity continue to grow through free cash flow share buy-backs and dividend payments will most likely be initiated. The fair value for GNW is currently in the range of $9-11 but as problems are solved and catalyst occur, enabling more efficient and effective future growth for the company, pricing the shares closer to B/V.

The recovery will not be quick and it is not a guaranteed money making opportunity, you must conduct your own research, know your risks and always do your due diligence before investing or trading.

Disclosure: I am Long GNW


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