Even though Hartford (currently trading at $133.39 per share) has gained 7.2% over the last six months, it has lagged the S&P 500’s 18.8% return during that period. This might have investors contemplating their next move.
Is there a buying opportunity in Hartford, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Hartford Not Exciting?
We're cautious about Hartford. Here are three reasons why HIG doesn't excite us and a stock we'd rather own.
1. Net Premiums Earned Point to Soft Demand
Net premiums earned are net of what’s paid to reinsurers (insurance for insurance companies), which are used by insurers to protect themselves from large losses.
Hartford’s net premiums earned has grown at a 6.2% annualized rate over the last five years, slightly worse than the broader insurance industry and in line with its total revenue.
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Hartford’s revenue to drop by 15%, a decrease from its 7.9% annualized growth for the past two years. This projection is underwhelming and implies its products and services will see some demand headwinds.
3. Steady Increase in BVPS Highlights Solid Asset Growth
In the insurance industry, book value per share (BVPS) provides a clear picture of shareholder value, as it represents the total equity backing a company’s insurance operations and growth initiatives.
Although Hartford’s BVPS increased by a meager 5.4% annually over the last five years, the good news is that its growth has recently accelerated as BVPS grew at a solid 16.3% annual clip over the past two years (from $45.00 to $60.88 per share).
Final Judgment
Hartford isn’t a terrible business, but it doesn’t pass our quality test. With its shares trailing the market in recent months, the stock trades at 2.2× forward P/B (or $133.39 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward one of our top digital advertising picks.
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