Voya Financial trades at $75.84 and has moved in lockstep with the market. Its shares have returned 11.5% over the last six months while the S&P 500 has gained 13.4%.
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Why Is Voya Financial Not Exciting?
We don't have much confidence in Voya Financial. Here are three reasons you should be careful with VOYA and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.
Regrettably, Voya Financial’s revenue grew at a mediocre 6.8% compounded annual growth rate over the last five years. This fell short of our benchmark for the financials sector.
2. Recent EPS Growth Below Our Standards
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Voya Financial’s EPS grew at a weak 4.1% compounded annual growth rate over the last two years, lower than its 6.8% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
3. Growing TBVPS Reflects Strong Asset Base
We consider tangible book value per share (TBVPS) an important metric for financial firms. TBVPS represents the real, liquid net worth per share of a company, excluding intangible assets that have debatable value upon liquidation.
Although Voya Financial’s TBVPS declined at a 14.6% annual clip over the last five years. the good news is that its growth inflected positive over the past two years as TBVPS grew at an incredible 57.2% annual clip (from $14.08 to $34.78 per share).
Final Judgment
Voya Financial isn’t a terrible business, but it isn’t one of our picks. That said, the stock currently trades at 7.8× forward P/E (or $75.84 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at the Amazon and PayPal of Latin America.
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