Is Now the Time to Buy Admiral Group plc (ADM)?

So right now I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I’m hoping to pinpoint the very best buying opportunities in today’s uncertain market.

Today I am looking at Admiral Group plc (LON:ADM) to determine whether you should consider buying the shares at 1,357 pence.

I am assessing each company on several ratios:

Price/Earnings (P/E): Does the share look good value when compared against its competitors?

Price Earnings Growth (PEG): Does the share look good value factoring in predicted growth?

Yield: Does the share provide a solid income for investors?

Dividend Cover: Is the dividend sustainable?

So, let’s look at the numbers:

Stock	Price	3-Yr. EPS Growth	Projected P/E	PEG	Yield	3-Yr. Dividend Growth	Dividend Cover
Admiral	1,357p	32%	14.2	14.2	5%	32%	2.2

The consensus analyst estimate for this year’s earnings per share is 95.5 pence (no growth) and dividend per share is 90.3 pence (no growth).

Firstly, I should mention the consensus analyst estimate for this year’s 90.3 pence per share dividend includes potential special dividends the company may declare. (Since its flotation, Admiral Group plc (LON:ADM) has consistently paid special dividends alongside ordinary dividends). Based on the company’s ordinary dividend history, however, and evaluating City forecasts further, I believe the regular payout for this year may well be left unchanged at 43 pence per share.

Anyway, trading on a projected P/E of 14.2, Admiral Group plc (LON:ADM) appears to be slightly more expensive than its peers in the non-life insurance sector, which are currently trading on an average P/E of around 13. In addition, Admiral’s P/E and low near-term projected growth rate give a PEG ratio of 14.2, which cannot help with my analysis.

Currently, Admiral Group plc (LON:ADM) supports a 5% dividend yield, which is slightly above the sector average of 4.7%. However, this yield figure includes a one-off special dividend of 24 pence a share. With the special dividend excluded, I believe the yield could be closer to 3.2% — below the sector average.

That said, Admiral Group plc (LON:ADM)’s regular payout has grown a compounded 32% during the past three years, indicating that the regular payout could soon catch up to that of the group’s peers. Indeed, the regular dividend payout is more than two times covered by earnings, giving plenty of room for further growth.

So is now the time to buy Admiral?
2012 was Admiral’s 20th anniversary and the company’s most successful year to date. Indeed, within the company’s full-year results released only last week, Admiral announced group profits were up 15% to 345 million pounds. However, the company did report a full-year loss of 24 million poundsfor its international operations.

Nonetheless, the majority of Admiral Group plc (LON:ADM)’s divisions performed strongly and profits from the company’s comparison website, confused.com, expanded by 13% during 2012.

Furthermore, Admiral Group plc (LON:ADM) is seeking to expand its international operations and diversify into new markets. For example, the company recently started offering home insurance to its U.K. customers as well as launch a new online comparison website focused on customers within the United States.

Unfortunately, despite Admiral’s special divided and solid growth last year, the firm currently looks expensive compared to its peers and near-term earnings growth. So overall, I believe now does not look to be a good time to buy Admiral at 1,357 pence.