Globe Life Inc. (NYSE:GL): Reversing the Short Momentum

We came across a bullish thesis on Globe Life Inc. (NYSE:GL) on ValueInvestorsClub by unlatchmergers. In this article, we will summarize the bulls’ thesis on GL. The company’s shares were trading at $110.09 when this thesis was published, vs. the closing price of $112.94 on Jan 13.

A close-up of a life insurance policy with a middle-and lower-income family in the background.

Globe Life Inc., through its subsidiaries, provides various life and supplemental health insurance products, and annuities to lower middle- and middle-income families in the United States. The company operates in four segments: Life Insurance, Supplemental Health Insurance, Annuities, and Investments.

A short article by Fuzzy Panda, accusing GL of fraud and improper conduct is the reason why the share price fell by almost 50% in April. However, the recent quarterly results demonstrate that the business performance remains strong. The underwriting income was 22% above the consensus estimates. Even health insurance earnings were higher and the agent count increased by 7% year-on-year. A low-cost business model with a niche customer target enables GL to grow amidst negative market sentiments.

The estimated growth in EPS is 10% for the next two years and could potentially be higher due to its buyback programs. While it has a higher exposure to BBB securities (49% compared to industry exposure of 32%), the sensitivity to interest rate is lower. The newer portfolio offers a higher yield of 6.2% (vs. the overall portfolio yield of 5.25%) and has a better average credit rating of A-. The ROE is almost 25% and can be easily sustained with a decreasing equity base.

GL trades at 1.3x its Book Value (minus Accumulated other comprehensive income) and 8.4x its 2025 EPS. This is a reasonable valuation compared to its peers. Using a blended multiple approach with 1.4x of 2025 Book Value minus AOCI (30% weight), 2x of 2025 Total Book Value (30% weight) and 9x of 2026 EPS (40% weight), there is a potential for a 23% upside. If only the long-term book value multiple of 2x is considered, the forecasted price could be 75% higher.

While we acknowledge the potential of GL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.