Aflac currently trades at $110.08 per share and has shown little upside over the past six months, posting a middling return of 2.7%.

Is there a buying opportunity in Aflac, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Do We Think Aflac Will Underperform?

We're swiping left on Aflac for now. Here are three reasons you should be careful with AFL and a stock we'd rather own.

1. Declining Net Premiums Earned Reflect Weakness

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are:

• Gross premiums - what’s ceded to reinsurers as a risk mitigation and transfer strategy

Aflac’s net premiums earned has declined by 6.2% annually over the last five years, much worse than the broader insurance industry. This shows that policy underwriting underperformed its other business lines.

2. Revenue Projections Show Stormy Skies Ahead

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Aflac’s revenue to drop by 1.1%, close to its flat result for the past two years. This projection is underwhelming and suggests its newer products and services will not accelerate its top-line performance yet.

3. BVPS Projections Show Stormy Skies Ahead

Book value per share (BVPS) growth comes from an insurer’s ability to price risk appropriately and invest premiums profitably.

Over the next 12 months, Consensus estimates call for Aflac’s BVPS to shrink by 2.7% to $53.62, a sour projection.

Final Judgment

We cheer for all companies serving everyday consumers, but in the case of Aflac, we’ll be cheering from the sidelines. That said, the stock currently trades at 1.9× forward P/B (or $110.08 per share). This multiple tells us a lot of good news is priced in - you can find more timely opportunities elsewhere. We’d recommend looking at one of our top digital advertising picks.

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