Over the past six months, Jackson Financial has been a great trade, beating the S&P 500 by 7.4%. Its stock price has climbed to $95.74, representing a healthy 12.1% increase. This run-up might have investors contemplating their next move.
Is now the time to buy Jackson Financial, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is Jackson Financial Not Exciting?
We’re happy investors have made money, but we're cautious about Jackson Financial. Here are three reasons why we avoid JXN and a stock we'd rather own.
1. Net Premiums Earned Point to Soft Demand
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 therefore gross premiums less what’s ceded to reinsurers as a risk mitigation and transfer strategy.
Jackson Financial’s net premiums earned has grown at a 2.8% annualized rate over the last two years, much worse than the broader insurance industry and slower than its total revenue.
3. EPS Trending Down
Analyzing the change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Jackson Financial’s full-year EPS dropped 32.7%, or 9.9% annually, over the last three years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Jackson Financial’s low margin of safety could leave its stock price susceptible to large downswings.
Final Judgment
Jackson Financial’s business quality ultimately falls short of our standards. With its shares beating the market recently, the stock trades at 0.6× forward P/B (or $95.74 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're fairly confident there are better stocks to buy right now. We’d suggest looking at an all-weather company that owns household favorite Taco Bell.
Stocks We Would Buy Instead of Jackson Financial
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