In April 2010, Citigroup (NYSE: C) spun out monetary companies firm Primerica (NYSE: PRI).
Since that time, Primerica’s inventory has completely thrashed the full return of the S&P 500.
The chart beneath is an investor’s dream!
From the time Primerica went public by means of immediately, the S&P 500 has generated a terrific return of 387%.
In the meantime, Primerica has generated a complete return for shareholders in extra of 1,000%. Merely excellent!
By way of a community of greater than 130,000 licensed North American gross sales representatives, Primerica sells life insurance coverage, mutual funds and different monetary merchandise for third events.
The corporate’s shoppers are, for probably the most half, households which have underneath $100,000 in annual earnings. These persons are typically in want of assist with retirement planning and regularly have insufficient life insurance coverage insurance policies.
That’s why roughly 60% of Primerica’s earnings comes from its time period life insurance coverage enterprise. And the opposite 40% comes from promoting funding and deposit merchandise.
The corporate’s salespeople are aggressive. They’re commission-based and efficient.
And we will see clear proof of that in Primerica’s earnings per share (EPS), which have elevated fourfold over the previous decade.
This development in EPS is what has pushed Primerica’s inventory outperformance.
Primerica’s secret weapon has been the corporate’s relentless deal with repurchasing shares.
Since Primerica’s IPO date simply over a decade in the past, the corporate has lower its share depend in half.
I don’t typically like how company groups deploy share repurchases.
If the shares being repurchased don’t characterize good worth, then a buyback destroys shareholder worth. We see that far too typically from company America.
Clearly, although, that hasn’t been the case right here.
By repurchasing shares at enticing costs, Primerica’s management has accelerated the corporate’s capability to develop earnings on a per-share foundation.
And keep in mind, people: It’s on a per-share foundation that we need to see the businesses we personal develop.
Regardless of rising EPS at a terrific annualized fee of greater than 16% over the previous dozen years, Primerica’s valuation is relatively modest.
The consensus analyst estimate for Primerica’s 2024 EPS is $17.20.
With a present share worth of simply over $200, meaning this nice development firm trades at simply 11.62 occasions 2024 earnings.
I’ll take an organization with this long-term development document at that valuation every single day of the week.
Primerica has years of development forward, and we will personal that development at a really good worth.
The Worth Meter charges Primerica shares as “Barely Undervalued.”
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