Over the past six months, Voya Financial’s stock price fell to $66.29. Shareholders have lost 12.1% of their capital, disappointing when considering the S&P 500 was flat. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Is now the time to buy Voya Financial, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Voya Financial Not Exciting?
Even with the cheaper entry price, we don't have much confidence in Voya Financial. Here are three reasons you should be careful with VOYA and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.
Unfortunately, Voya Financial’s 6.7% annualized revenue growth over the last five years was mediocre. This fell short of our benchmark for the financials sector.
2. Recent EPS Growth Below Our Standards
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Voya Financial’s unimpressive 5.4% annual EPS growth over the last two years aligns with its revenue trend. On the bright side, this tells us its incremental sales were profitable.
3. Growing TBVPS Reflects Strong Asset Base
Tangible book value per share (TBVPS) is a crucial metric that measures the actual value of shareholders’ equity, stripping out goodwill and other intangible assets that may not be recoverable in a worst-case scenario.
Although Voya Financial’s TBVPS declined at a 15.6% annual clip over the last five years. the good news is that its growth inflected positive over the past two years as TBVPS grew at an exceptional 17.8% annual clip (from $25.16 to $34.90 per share).
Final Judgment
Voya Financial isn’t a terrible business, but it doesn’t pass our quality test. After the recent drawdown, the stock trades at 6.7× forward P/E (or $66.29 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're fairly confident there are better stocks to buy right now. We’d recommend looking at a dominant Aerospace business that has perfected its M&A strategy.
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