Aviva (LSE: AV) shares have been a high performer recently, however I’m questioning if I’m too late to the get together.
Within the final 12 months, they’ve jumped 22.7%. After the agency launched a robust set of outcomes on 7 March, the inventory is up 7.4% alone.
Protected to say they’re hovering. A lot so, the share worth is the best it has been since 2018.
I mentioned following its outcomes that I’d strongly think about including Aviva shares to my portfolio if I had the money. However since then, they’re up an additional 5.2%. Is there any worth left within the share worth?
Assessing the inventory
There are a couple of strategies I may use to assist me reply this. One is the price-to-earnings (P/E) ratio. The P/E ratio is discovered by dividing a inventory’s worth by the corporate’s earnings per share. For Aviva, its trailing P/E ratio is 13.2. That’s barely above the FTSE 100 common round 11. Nonetheless, Aviva is cheaper than a bunch of its friends together with Prudential (15.8) and Admiral Group (25.6).
The enterprise itself
Judging by that, it appears Aviva doubtlessly nonetheless has some rising house. However let’s take a step again. Warren Buffett says to purchase companies, not shares. With that, I need to dig just a little deeper into Aviva as an organization.
In my view, there’s a lot to love. Kicking issues off with its cost-cutting mission, the agency has made stable progress in recent times in the case of streamlining its operations.
It’s removed properly over a dozen of its underperforming companies. Because it continues to slim down, there are talks of it disposing of additional abroad operations within the months to come back, together with in India and China.
I feel it’s a transfer that is smart. Aviva has been streamlining for over a decade. Beneath its present CEO Amanda Blanc this has been catalysed. Final yr the corporate revealed that it delivered its £750m value discount goal a yr forward of schedule. Evidently, one thing appears to be working.
What I additionally like is its progressive dividend coverage. As I write, Aviva shares supply buyers a 6.7% yield. Final yr, the enterprise hiked its payout by 8% to 33.4p a share whereas additionally upgrading its dividend steerage to mid-single-digit development on common annually. To go along with that, it additional revealed a £300m share buyback scheme.
Not with out warning
That mentioned, I’m cautious of some potential points.
Streamlining is a great transfer. However, it leaves the enterprise reliant on only a few core markets. Ought to they falter, this might spell bother. For instance, it’s forecast that development within the UK financial system shall be lacklustre this yr.
There’s additionally the chance of competitors. The insurance coverage trade is perpetually evolving. Threats from rising insurtechs may create issues for Aviva.
Room for extra?
However, as Aviva shares proceed their upward trajectory, I feel there’s nonetheless some room for development going ahead.
I just like the steps the corporate has taken to restructure in recent times. What’s extra, it’s an trade stalwart with sturdy model recognition. These are the form of companies I prefer to personal.
If I had the money, I’d nonetheless fortunately snap up some shares.
