On Tuesday, Citi updated its outlook on Assicurazioni Generali (BIT:GASI) SpA (G:IM) (OTC: ARZGY), raising its price target to €28.70 from €23.36, while maintaining a Buy rating on the stock. The firm forecasts a 12% compound annual growth rate (CAGR) in earnings per share (EPS) from 2024 to 2026 for the Italian insurer. The updated target represents a 21% increase from the previous figure.
The analyst at Citi believes that Assicurazioni Generali's EPS growth is supported by the introduction of regular share buybacks, a factor not widely anticipated in consensus estimates. Citi's projections are only 4% higher than the consensus for 2026, but the firm sees the potential for further upside. A 2 percentage point improvement in the combined operating ratio (COR) could translate to a 12% EPS upgrade.
Citi also points to the potential for retained capital to provide additional value that has not been fully recognized. The firm suggests that this could lead to a 22% increase in value over a three-year period. The forecast for Assicurazioni Generali's free cash flow (FCF) is more optimistic than the consensus, with expectations of higher than anticipated remittances.
Additional positive factors include faster growth in property and casualty (P&C) operating free generation (OFG) and improved cash conversion.
The firm emphasizes the strength of Assicurazioni Generali's business model, which focuses on optimizing existing operations and efficient capital deployment. In light of these factors, Citi has added Assicurazioni Generali to its European Focus List, indicating a favorable outlook for the company's stock among its European equity recommendations.
InvestingPro Insights
Complementing the optimistic outlook from Citi, recent data from InvestingPro reflects a robust financial position for Assicurazioni Generali (OTC: ARZGY). With a market capitalization of $39.99 billion and a trailing P/E ratio as of Q4 2023 at 9.47, the company presents as a potentially undervalued player in the insurance industry. This is further underscored by a PEG ratio of 0.14, suggesting that the stock trades at a low price relative to near-term earnings growth. The revenue growth of 12.75% in the last twelve months as of Q4 2023, combined with a gross profit margin of 17.82%, points to Assicurazioni Generali's capacity for generating earnings efficiently.
An InvestingPro Tip worth noting is the company's low price volatility, which may appeal to investors seeking stability. Additionally, Assicurazioni Generali has demonstrated a commitment to shareholder returns, maintaining dividend payments for 33 consecutive years, with a dividend yield as of mid-2024 standing at 3.55%. For those interested in further insights, InvestingPro offers additional tips on Assicurazioni Generali's performance and potential, which can be accessed through their platform. To gain a deeper understanding and access these additional tips, readers can use the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
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