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Unum (UNM) Rides High on Growth Prospects: Time to Buy?


Unum Group UNM is poised for growth, banking on strong persistency levels in core business lines and a sturdy sales volume along with bouts of solid benefits. The company has been witnessing upward estimate revisions over the past 60 days. This Zacks Rank #2 (Buy) accident & health insurer remains promising on the back of several growth prospects.

Growth Projections: The Zacks Consensus Estimate for earnings per share is pegged at $4.24 on revenues of $11.26 billion for 2017. While the top line improves 2.4% year over year, the bottom line rises 8.1%.

For 2018, the Zacks Consensus Estimate for earnings per share is $4.46 on revenues of $11.57 billion, reflecting a year-over-year increase of 5.2% and 2.7%, respectively.

Unum has expected long-term earnings per share growth of 7%, better than the industry average of 6%.

Northbound Estimates: The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 1.7% upward and for 2018 moved 1.1% north over the last 60 days.

Price Outperformance: Shares of Unum have rallied 25.7% year to date, outperforming the industry’s growth of 22.6%. The stock has also outpaced the S&P 500 index’s 16.7% gain during the period.

Positive Earnings Surprise History: Unum has surpassed the Zacks Consensus Estimate in each of the last four quarters with an average beat of 3.20%.

Attractive Valuation: Looking at the company’s price-to-book ratio — the best multiple for valuing insurers because of large variations in their earnings results from one quarter to the next — shares are underpriced at the current level. The company has a trailing 12-month P/B ratio of 1.31, falling below the industry average of 1.34. Undervalued shares with growth prospects are the best investment bets. Unum carries a Value Score of A.

Back-tested results have shown that stocks with a Value Score of A or B when combined with a favorable Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.

Growth Drivers in Place

Unum has been able to sustain profitability over the years, courtesy of conservative pricing and reservation practices.

Higher premiums and favorable risk results should continue to deliver a solid performance at its two largest segments, Unum U.S. and Unum U.K. Strong sales and persistency will support the upside.

Unum has remained focused on moving on to a mix of businesses with higher growth and stable margins.

Unum now expects 2017 operating earnings per share to grow at or slightly above the 5-8% range.

Driven by its solid operational performance, Unum effectively deploys capital. Approval of 15% dividend hike this year, marked the ninth consecutive year of dividend raise. The metric has witnessed a five-year growth rate of 14.3%, better than the industry average of 5.8%. The company also has a $750 million buyback program under its authorization.

Other Stocks to Consider

Investors interested in the same space can also look at a few other top-ranked stocks like Trupanion, Inc. TRUP, Amerisafe, Inc. AMSF and Employers Holdings, Inc. EIG.

Trupanion, Inc., provides medical insurance plans for cats and dogs on monthly subscription basis in the United States, Canada and Puerto Rico. The company delivered an average four-quarter positive surprise of 38.75%. The stock flaunts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Amerisafe provides workers compensation insurance in the United States. The company pulled off an average four-quarter beat of 1.44%. The stock carries a Zacks Rank of 2.

Employers Holdings operates in the commercial property and casualty insurance industry, primarily in the United States. The company came up with an average four-quarter positive surprise of 29.04%. The stock is a Zacks #2 Ranked player.

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