Should You Buy QBE Insurance Group Limited (ASX:QBE) At AU$11.11?
Today we are going to take a look at the well-established QBE Insurance Group Limited (ASX:QBE). The company’s stock saw a double-digit share price rise of over 10% in the past couple of months on the ASX. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on QBE Insurance Group’s outlook and valuation to see if the opportunity still exists.
Check out our latest analysis for QBE Insurance Group
What’s the opportunity in QBE Insurance Group?
The stock seems fairly valued at the moment according to my valuation model. It’s trading around 3.98% above my intrinsic value, which means if you buy QBE Insurance Group today, you’d be paying a relatively fair price for it. And if you believe that the stock is really worth A$10.68, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, it seems like QBE Insurance Group’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
Can we expect growth from QBE Insurance Group?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Though in the case of QBE Insurance Group, it is expected to deliver a negative revenue growth of -5.19% over the next couple of years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.
What this means for you:
Are you a shareholder? QBE seems fairly priced right now, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on QBE for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on QBE should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on QBE Insurance Group. You can find everything you need to know about QBE Insurance Group in the latest infographic research report. If you are no longer interested in QBE Insurance Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
