They're cautious because of the low returns in the life division and concerns that the U.S. Morgan analysts have an $8 price target and a "neutral" call. To be sure, not everyone thinks the shares are cheap. The big knock against Genworth and the reason it's trading so cheaply is that it hasn't been very profitable, earning a return on equity of only 3 per cent last year, although that shouldn't be too much of a concern for investors buying in at one quarter of book. He said not much has changed since then and the rest of the company is available at a "dirt cheap" multiple. Palmer did some number crunching along these lines in 2011 when he initiated coverage on the company and calculated the life insurance and wealth management operation was trading at only 1.8 times earnings, a rock bottom valuation. mortgage business is in the early stages of a turnaround. Strip out these assets, and investors are getting the rest of the company almost for free, with the added kicker that the U.S. Meanwhile, its market capitalization stands at $4.2-billion – but its share of the Canadian subsidiary is worth $1.4-billion and the Australian unit about $2.3-billion. 31 of $33.62 a share, compared to its recent market stock price of about $8.50. He rates the stock a "buy" and has an $11 target.Ī short foray into some of the moving parts of the Genworth balance sheet illustrates why the market may be mispricing the company. "We've seen the shares appreciate somewhat but they are still, in our view, no way reflective of the company's inherent value," contends Mark Palmer, analyst in New York for BTIC, an investment dealer that caters to institutional clients. The shares have rallied a bit on hopes for the housing recovery, but not nearly exhausting the upside potential. mortgage business should return to profitability this year, a welcome development after years of losses. The home loans insured since 2008 are highly profitable, and exhibit excellent underwriting standards. Most of the liar loans and other dubious mortgages Genworth insured before the crash are being run down. The thesis of the bulls is that Genworth has a likely catalyst that could move the shares upward: the U.S. The company also has a medium-sized money management business, and offers mortgage insurance in Australia. 2 player in the domestic mortgage insurance market after federally owned Canada Mortgage and Housing Corp. Its credit rating is triple B minus, still investment grade, although just a notch above junk status.Ĭanadians may be familiar with the name – its Canadian-owned affiliate, Genworth MI Canada Inc., trades in Toronto and is the profitable No. Besides mortgage insurance, it offers traditional life insurance and is one of the largest providers of long-term care insurance in the United States. It has a respectable corporate pedigree, having been spun out of conglomerate General Electric Co. It had $114-billion in assets at last count. Genworth isn't an obscure, fly-by-night company. If he sees a gem in a publicly traded stock that the street has priced as a dog, it's worth a closer look. It isn't every day that ordinary investors can take a position alongside a money manager of Mr.
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