Should You Consider Direct Line Insurance Group plc (LON:DLG) For These Reasons?
As an investor, I look for investments which does not compromise one fundamental factor for another. By this I mean, I look at stocks holistically, from their financial health to their future outlook. In the case of Direct Line Insurance Group plc (LON:DLG), it is a financially-healthy company with a a great track record of performance, trading at a discount. Below, I’ve touched on some key aspects you should know on a high level. For those interested in understanding where the figures come from and want to see the analysis, take a look at the report on Direct Line Insurance Group here.
Excellent balance sheet with solid track record
DLG delivered a bottom-line expansion of 22.2% in the prior year, with its most recent earnings level surpassing its average level over the last five years. Not only did DLG outperformed its past performance, its growth also surpassed the Insurance industry expansion, which generated a -2.8% earnings growth. This is an notable feat for the company. With a debt-to-equity ratio of 11.5%, DLG’s debt level is acceptable. This implies that DLG has a healthy balance between taking advantage of low cost debt funding as well as sufficient financial flexibility without succumbing to the strict terms of debt. DLG appears to have made good use of debt, producing operating cash levels of 1.57x total debt in the prior year. This is a strong indication that debt is reasonably met with cash generated.
DLG is currently trading below its true value, which means the market is undervaluing the company’s expected cash flow going forward. This mispricing gives investors the opportunity to buy into the stock at a cheap price compared to the value they will be receiving, should analysts’ consensus forecast growth be correct. Compared to the rest of the insurance industry, DLG is also trading below its peers, relative to earnings generated. This bolsters the proposition that DLG’s price is currently discounted.
Next Steps:
For Direct Line Insurance Group, I’ve compiled three relevant factors you should look at:
Future Outlook: What are well-informed industry analysts predicting for DLG’s future growth? Take a look at our free research report of analyst consensus for DLG’s outlook.
Dividend Income vs Capital Gains: Does DLG return gains to shareholders through reinvesting in itself and growing earnings, or redistribute a decent portion of earnings as dividends? Our historical dividend yield visualization quickly tells you what your can expect from DLG as an investment.
Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of DLG? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
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.
