We came across a bullish thesis on Jackson Financial Inc. (JXN) on Substack by Unemployed Value Degen. In this article, we will summarize the bulls’ thesis on JXN. Jackson Financial Inc. (JXN)’s share was trading at $84.87 as of Feb 25th. JXN’s trailing P/E was 7.23 according to Yahoo Finance.
A financial analyst pouring over graphs and charts related to annuities and fixed index annuities.
Jackson Financial (JXN) remains a hidden gem in the financial sector, offering a compelling investment opportunity with strong capital returns, significant undervaluation, and long-term growth potential. Despite its recent stock selloff from $95 to $82.50, the market has overlooked JXN’s exceptional fundamentals, making its current price of $84.50 a gift for investors. Trading at just 0.65x price to tangible book value, JXN’s aggressive share buyback program is highly accretive. In 2024, the company returned $631 million to shareholders through $415 million in share repurchases and $216 million in dividends, aligning with management’s guidance of $550 million to $650 million. Looking ahead, JXN has raised its 2025 guidance to $700 million to $800 million, representing a 23% year-over-year increase in capital returns.
JXN’s ability to return capital while maintaining a strong balance sheet is a testament to its financial strength. The company generated $18.76 per share in operating income but returned only $8.60 per share to shareholders, with the rest reinvested in working capital. This conservative approach ensures liquidity but also means future capital distributions will likely inflect higher once the business reaches maturity. The ongoing “silver tsunami” of baby boomers purchasing variable annuities has driven 39% year-over-year growth in annuity sales, further solidifying JXN’s long-term cash flow generation. As the business scales, the required reinvestment will decline, unlocking more cash for shareholders.
Despite its strong performance, JXN remains significantly undervalued. At a P/E ratio of just 4.44x based on 2024 operating income, the stock trades at a deep discount compared to more mature financial firms, which command multiples of 15x to 20x. This suggests substantial upside potential, with room for JXN to triple in value over time. While the market is slow to recognize JXN’s true worth, its growing cash flows, rising payout ratio, and disciplined capital return strategy will eventually drive a significant rerating. Meanwhile, share buybacks at below book value provide an attractive floor for investors.
JXN’s capital return framework is particularly compelling. Management strategically prioritizes buybacks to enhance shareholder returns, effectively growing dividends inorganically while benefiting from organic EPS growth. This dual-engine approach makes JXN a formidable long-term compounder. Investors benefit not only from the current 11.6% shareholder yield, growing at 23%, but also from a 22% earnings yield, underpinned by 14.6% EPS growth in 2024. With a high-quality business model, a disciplined management team, and significant undervaluation, JXN presents a rare opportunity to own a long-term compounder with both strong income generation and capital appreciation potential.
Jackson Financial Inc. (JXN) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 33 hedge fund portfolios held JXN at the end of the third quarter which was 30 in the previous quarter. While we acknowledge the risk and potential of JXN 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 timeframe. If you are looking for an AI stock that is more promising than JXN 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.