Is Now the Time to Buy Aviva Plc (ADR) (AV)?

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 Aviva Plc (ADR) (NYSE:AV) to determine whether you should consider buying the shares at 300 pence.

I am assessing each company on several ratios:

Price/Earnings (P/E) Ratio: Does the share look like a good value when compared to its competitors?

Price/Earnings-to-Growth (PEG) Ratio: 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
Aviva	300 pence	N/A	6.8	N/A	4.8%	-26%	N/A

The consensus analyst estimate for next year’s earnings per share is 44.4 pence and dividend per share is 15 pence (44% fall).

Let me start by saying that, according to various websites, the current dividend forecast figure for Aviva is 20.3 pence per share. However, I believe this consensus figure could be misleading following Aviva’s recent dividend cut and that the actual dividend payment for 2013 will be closer to 15 pence.

In addition, as Aviva Plc (ADR) (NYSE:AV) reported a loss of 15.2 pence per share for 2012, it is not possible for me to calculate a three-year earnings growth rate. In addition, due to Aviva’s loss, I am not able to calculate the company’s PEG ratio or dividend cover.

That said, I am able to calculate Aviva’s projected P/E. Indeed, Aviva Plc (ADR) (NYSE:AV) is trading on a projected P/E of 6.8, below its peers in the life insurance sector, which are currently trading on an average P/E of around 17.7.

Supporting a dividend yield of 4.8%, Aviva’s dividend income is significantly higher than the sector average of 3.6%. However, Aviva’s dividend payout has fallen a compounded 26% over the last three years.

Finally, Aviva Plc (ADR) (NYSE:AV) has a net asset value of 278 pence a share, which indicates that the company is currently trading at just a 7% premium to the value of its assets.

So is now the time to buy Aviva?
At the beginning of March, Aviva spooked investors when it announced it was going to slash its dividend in order to preserve cash after the company lost 3 billion pounds in 2012. However, I believe the market has overreacted to Aviva’s woes and that the shares currently look undervalued.

You see, even though Aviva reported a loss of 3 billion pounds for 2012, this figure included a one-off writedown of 3.3 billion pounds, which was related to the disposal of the Aviva’s U.S. business. Indeed, ignoring the writedown, it appears Aviva Plc (ADR) (NYSE:AV) made an underlying profit of 1.7 billion pounds for 2012.

Furthermore, after the exclusion of currency movements, Aviva Plc (ADR) (NYSE:AV) made an underlying profit of 1.8 billion pounds for 2012 — the same as 2011.

In addition, it appears that management is working hard to restructure the company and improve shareholder returns. In particular, during 2012, it sold several underperforming divisions and achieved cost savings across the group of 275 million pounds.

So, after taking all of that into account and factoring Aviva’s current discount to its peers, I feel now looks to be a good time to buy Aviva at 300 pence.