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Athene: Is There Room Left to Run?

·2 min read

- By Nicholas Kitonyi

Shares of diversified insurance services provider Athene Holding Ltd. (NYSE:ATH) gained more than 7% on Tuesday.

Athene: Is There Room Left to Run?
Athene: Is There Room Left to Run?

Athene announced third-quarter results before the opening bell on Tuesday, topping analysts' expectations for earnings and revenue. Shares of the company have now rallied more than 116% since bottoming in March. However, they are still down more than 25% this year.

The company's stock is trading very close to the Peter Lynch earnings line, which suggests that the upside potential could be limited.

Highlights from recent quarterly results

Athene posted earnings of $1.53 per share, which beat analysts' expectations of $1.14. This represents 14%growth from the bottom line of $1.34 per share posted in the same period a year ago.

Revenue also grew from $1.29 billion in the prior-year quarter to $1.53 billion, surpassing projections by 6.6%.

The company has remained resilient despite challenging market conditions. Quarterly organic deposits of $7.4 grew to a record level for the second consecutive quarter. This represented 31% year-over-year growth.

The company expects strong growth in organic volumes going into the fourth quarter. In a statement, CEO Jim Belardi said, "Following consecutive quarters of record organic growth above target returns, we are on pace to exceed $50 billion of total organic and inorganic volumes in 2020, marking our best year of growth ever."

Belardi attributed the company's achievements to the successful execution of its strategy, adding that it "has laid the foundation to significantly increase earnings and drive compelling shareholder value in 2021 and beyond."


From a valuation perspective, shares of Athene appear to be trading at incredible valuation multiples. Its current price-earnings ratio of about 13.30 is below the Peter Lynch earnings line, which indicates a possible case of modest undervaluation.

When you compare Athene's forward 12-month price-earnings ratio of 3.88 to its close rivals, it looks highly competitive versus Apollo Global Management Inc.'s (NYSE:APO) equivalent of 13.95. On the other hand, Voya Financial Inc. (NYSE:VOYA) trades at a forward price-earnings ratio of 8.26.

In summary, shares of Athene appear to be competitively valued when compared to its industry peers. However, when we look at the comparison to the Peter Lynch earnings line, there is enough room left to run before the stock reaches fair valuation.

Therefore, it may be worth waiting to see how the company performs in the coming quarter before buying.

Disclosure: No positions in the stock mentioned.

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This article first appeared on GuruFocus.