Globe Life Inc. (NYSE:GL): Reversing the Short Momentum

We came across a bullish thesis on Globe Life Inc. (NYSE:GL) on ValueInvestorsClub by unlatchmergers. In this article, we will summarize the bulls’ thesis on GL. The company’s shares were trading at $110.09 when this thesis was published, vs. the closing price of $112.94 on Jan 13.

A close-up of a life insurance policy with a middle-and lower-income family in the background.

Globe Life Inc., through its subsidiaries, provides various life and supplemental health insurance products, and annuities to lower middle- and middle-income families in the United States. The company operates in four segments: Life Insurance, Supplemental Health Insurance, Annuities, and Investments.

A short article by Fuzzy Panda, accusing GL of fraud and improper conduct is the reason why the share price fell by almost 50% in April. However, the recent quarterly results demonstrate that the business performance remains strong. The underwriting income was 22% above the consensus estimates. Even health insurance earnings were higher and the agent count increased by 7% year-on-year. A low-cost business model with a niche customer target enables GL to grow amidst negative market sentiments.

The estimated growth in EPS is 10% for the next two years and could potentially be higher due to its buyback programs. While it has a higher exposure to BBB securities (49% compared to industry exposure of 32%), the sensitivity to interest rate is lower. The newer portfolio offers a higher yield of 6.2% (vs. the overall portfolio yield of 5.25%) and has a better average credit rating of A-. The ROE is almost 25% and can be easily sustained with a decreasing equity base.

GL trades at 1.3x its Book Value (minus Accumulated other comprehensive income) and 8.4x its 2025 EPS. This is a reasonable valuation compared to its peers. Using a blended multiple approach with 1.4x of 2025 Book Value minus AOCI (30% weight), 2x of 2025 Total Book Value (30% weight) and 9x of 2026 EPS (40% weight), there is a potential for a 23% upside. If only the long-term book value multiple of 2x is considered, the forecasted price could be 75% higher.

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Disclosure: None. This article was originally published at Insider Monkey.