Even though ongoing supply chain disruptions and record-high inflation worry investors, impressive third-quarter earnings reports so far have helped the major stock market indexes rally. According to a FactSet report, more S&P 500 companies are beating EPS estimates for the third quarter than average and beating EPS estimates by a wider margin than average.
Moreover, the Conference Board Consumer Confidence Index stood at 113.8 on October 26, increasing from 109.8 in September. Given the positivity in the market, many stocks have reached valuations that are not in sync with their growth prospects. However, several stocks are still trading at reasonable valuations. According to Research Affiliates Founder and Chairman Rob Arnott, value stocks might provide a 5-10% return over the next decade.
So, it could be wise to bet on quality mid-cap stocks Assurant, Inc. (AIZ), Jabil Inc. (JBL), and First American Financial Corporation (FAF), which look undervalued at their current price levels. These stocks have an overall B (Buy) rating in our proprietary POWR Ratings system.
Assurant, Inc. (AIZ)
AIZ provides lifestyle and housing solutions that support, protect, and connect consumer purchases across the globe. The company operates through three segments: Global Lifestyle; Global Housing; and Global Preneed. It has a market capitalization of $9.54 billion.
On October 12, 2021, AIZ announced the launch of several new digital retailing offerings for dealerships. Assurant Global Automotive Senior Vice President of Global Transformation, Martin Jenns, said, “As automotive consumers begin to shift more of their experience online, Assurant is focused on helping dealers create a strong, omnichannel presence for their customers, so they can continue seeing the same profit margins, regardless of where the sales process begins, long into the future.”
AIZ’s total revenue increased 8.1% year-over-year to $2.54 billion for the fiscal second quarter that ended June 30, 2021. The company’s net income came in at $203.40 million, representing a 17.2% year-over-year rise. Its EPS increased 16.2% year-over-year to $3.01, and its adjusted EBITDA came in at $297.60 million, up 10.1% year-over-year.
In terms of forward EV/S, AIZ’s 0.95x is 70.9% lower than the industry average of 3.26x. In addition, the stock’s forward P/S of 0.95x is lower than the industry average of 3.47x.
For fiscal 2022, analysts expect AIZ’s revenue to be $10.71 billion, representing a 7% year-over-year rise. The company’s EPS is expected to increase 29.5% year-over-year to $11.18 in fiscal 2021. In addition, it surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 31.8% to close yesterday’s trading session at $162.26.
AIZ’s POWR Ratings reflect this promising outlook. The stock has an overall grade of B, which equates to a Buy rating in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has a B grade for Stability and Growth. Within the Insurance – Accident & Supplemental industry, it is ranked #2 out of 10 stocks. Click here to see additional grades for Value, Quality, Momentum, and Sentiment.
Jabil Inc. (JBL)
With a market capitalization of $8.82 billion, JBL provides manufacturing services and solutions worldwide. The company operates in two segments: Electronics Manufacturing Services and Diversified Manufacturing Services. In addition, it provides electronic design, production, and product management services.
On October 19, 2021, Jabil Packaging Solutions (JPS), a division of JBL, announced its reinvention of the wipe’s container. Vice President of Technology Ayana Johnson, Jabil Packaging Solutions, said, “As home delivery has taken off, we’ve seen traditional canisters struggle with the bumps, shocks, and vibrations of shipping directly to consumers. These factors drove us to reinvent the wipes container with FusePack packaging.”
For the fiscal fourth quarter that ended August 31, 2021, JBL’s net revenue increased 1.5% year-over-year to $7.41 billion. Its gross profit came in at $587 million, up 19.6% year-over-year. Its net income came in at $175 million, up 157.4% year-over-year. Also, its EPS increased 163.6% year-over-year to $1.16.
In terms of forward EV/S, JBL’s 0.35x is 91.7% lower than the industry average of 4.18x. In addition, the stock’s 0.28x forward P/S is lower than the industry average of 4.06x.
JBL’s revenue is expected to come in at $31.52 billion in fiscal 2022, representing a 7.6% year-over-year rise. In addition, the company’s EPS is expected to increase 13.4% year-over-year to $6.36 in the current year. Also, it surpassed Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 80.3% to close yesterday’s trading session at $61.53.
It’s no surprise that JBL has an overall grade of B, which equates to a Buy rating in our proprietary ratings system. In addition, it has a B grade for Sentiment, Value, and Quality.
First American Financial Corporation (FAF)
Financial services provider FAF operates through Title Insurance and Services and Specialty Insurance segments. Operating for more than a century, the company has focused on serving its customers with the most efficient, personalized services and products. Its market capitalization is $8.16 billion.
On October 25, 2021, FAF announced the completion of its acquisition of ServiceMac, LLC, an innovative mortgage subservicing company. Dennis J. Gilmore, FAF’s CEO, said, “We are pleased to welcome ServiceMac to the First American family. ServiceMac’s rapid growth, innovative technology and business leadership align well with our ongoing commitment to support the mortgage industry and further expand our product innovation efforts.”
FAF’s total revenues increased 33.6% year-over-year to $2.56 billion in the fiscal third quarter that ended September 30, 2021. Its pre-tax income came in at $603.17 million, representing a 147.8% year-over-year rise and its pre-tax margin came in at 23.6% compared to 12.7% in the previous period. Also, its EPS came in at $4, up 146.9% year-over-year.
In terms of forward EV/S, FAF’s 1.06x is 67.5% lower than the industry average of 3.26x. In addition, the stock’s forward P/S of 0.99x is lower than the industry average of 3.47x.
Analysts expect FAF’s revenue to grow 22.6% year-over-year to $8.69 billion in fiscal 2021. In addition, the company’s EPS is expected to increase 37.4% to $7.49 in the current year. Also, it surpassed Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 56% to close yesterday’s trading session at $74.30.
FAF’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, which equates to a Buy rating in our proprietary ratings system.
In addition, it has a B grade for Value and Sentiment. It is ranked #22 out of 102 stocks in the Financial Services (Enterprise) industry. Click here to see the additional grades for FAF (Momentum, Stability, Growth, and Quality).
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AIZ shares were trading at $161.85 per share on Wednesday afternoon, down $0.41 (-0.25%). Year-to-date, AIZ has gained 20.42%, versus a 23.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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