Shares of Globe Life Inc. GL have gained 2.5% in three months compared with the industry’s growth of 16.4%. The Finance sector and the S&P 500 composite returned 2.7% and 11.1%, respectively.
YTD Price Performance
Image Source: Zacks Investment Research
With a market capitalization of $8.79 billion, the average volume of shares traded in the last three months was 0.6 million.
Earnings have grown 12.4% in the past five years, better than the industry average of 5.1%. Globe Life's bottom line outpaced estimates in three of the trailing four quarters and missed in one, the average surprise being 4.58%.
GL Trading Above 200-Day Moving Average
GL closed at $104.76 on Wednesday, above the 200-day simple moving average (SMA) of $97.94, representing an uptrend. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
GL’s Growth Projection
The Zacks Consensus Estimate for Globe Life’s 2024 earnings per share indicates a year-over-year increase of 15.5%. The consensus estimate for revenues is pegged at $5.82 billion, implying a year-over-year improvement of 5.5%.
The consensus estimate for 2025 earnings per share and revenues indicates an increase of 9.8% and 5%, respectively, from the corresponding 2024 estimates.
Positive Analyst Sentiment Instills Confidence in GL
One of the seven analysts covering the stock has raised estimates for 2024 and 2025 over the past 30 days. Thus, the Zacks Consensus Estimate for 2024 and 2025 moved 0.4% and 0.2% north, respectively, in the last 30 days.
GL’s Return on Capital
GL’s trailing 12-month return on equity is 22.9%, ahead of the industry average of 19%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.
Also, the return on invested capital (ROIC) in the trailing 12 months was 13.7%, better than the industry average of 4.7%. Its ROIC has been increasing over the last few quarters amid capital investment made over the same time frame. This reflects the company’s efficiency in utilizing funds to generate income.
Key Drivers of Globe Life
Globe Life has been witnessing a positive trend in revenues, driven by premium growth in its Life Insurance and Health Insurance segments and net investment income.
The strong performance of the American Income and Liberty National divisions should drive the top line in the future. Liberty National is likely to continue to benefit from improved productivity and agent count. GL’s expansion initiatives to capture heavily populated and less penetrated areas should drive growth in the future. Net life sales, as well as net health sales, are expected to grow in the mid-teens for Liberty National.
Moreover, net investment income continues to be another important driver of the company’s top-line growth and has been exhibiting improvement over the last few years. The metric is likely to keep growing, riding on improved invested assets and higher interest rates on new investments.
The company has maintained a strong liquidity position with sufficient cash-generation capabilities. Its operations comprise writing basic protection life and supplemental health insurance policies, which generate strong and stable cash flows. For 2024, Globe Life has targeted a consolidated Company Action Level RBC ratio of 300-320%.
A strong capital position enables Globe Life to enhance its shareholder value via share buybacks and dividend payouts. The insurer has continuously been increasing its dividend over the past eight years (2016-2023) at a CAGR of 6.79%.
GL Shares are Affordable
Globe Life is trading at a discount compared with the industry average. It presents a compelling investment opportunity with its attractive forward 12-month price-to-book ratio of 2.03X, lower than the industry average of 3.16X. Also, it has a Value Score of A.
Shares of other players from the same space, such as Guild Holdings Company GHLD, Marex Group PLC MRX and PRA Group, Inc. PRAA, are also trading at a discount to the industry average.
Conclusion
Globe Life’s higher life and health sales, improved invested assets, increased productivity and agent count, strong liquidity position and effective capital deployment make it an attractive stock. Globe Life should benefit from higher return on capital and favorable growth estimates.
GL also has a VGM Score of B. Stocks with a favorable VGM Score are those with the most attractive value, best growth and most promising momentum compared with peers. Coupled with the positives and the affordability of the stock, the time appears right for potential investors to bet on this Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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