With shares in Aviva (LSE: AV) having fallen by 17% since the turn of the year, now may not seem like an opportune moment to buy a slice of the life insurer. After all, it’s difficult to catch a falling knife. However, with Aviva performing well as a business and the integration of Friends Life progressing as expected, Aviva could prove to be an excellent long-term buy.

Certainly, its shares may fall further in the short run, but with Aviva forecast to increase its bottom line by 9% next year, investor sentiment could begin to shift in the coming months. That’s especially the case since Aviva trades on a price-to-earnings (P/E) ratio of only 9, which indicates that it offers significant upward rerating potential. And with Aviva having a yield of 5.5%, it remains one of the higher yielding stocks in the FTSE 100.

Clearly, Aviva is a rapidly changing business with an ambitious strategy to become a dominant life insurer. While change brings risk, its low valuation suggests that Aviva has a wide margin of safety and is therefore worth buying right now.

Long-term pick

Also falling since the start of the year have been shares in Dixons Carphone (LSE: DC), with the retailer recording a decline of 16%. Part of the reason for this is an expectation by investors that 2016 will be a tough year for retailers such as Dixons Carphone and that their profitability could come under a degree of pressure.

However, with Dixons Carphone forecast to increase its bottom line by 13% in the current financial year and then by a further 10% next year, it seems to be on track to post above average growth numbers. And with its shares trading on a price-to-earnings-growth (PEG) ratio of just 1.2, Dixons Carphone offers a wide margin of safety in case its guidance is downgraded in the coming months. This means that while its near-term share price performance has the potential to disappoint, Dixons Carphone looks set to have a bright long-term future.

Wait and see

Meanwhile, shares in Johnson Matthey (LSE: JMAT) have stabilised in recent months after a difficult year in which the shares have fallen by around 20%. This has made them better value, but not exactly dirt cheap since the speciality chemicals company still trades on a P/E ratio of 15.2. That seems to be fair value when Johnson Matthey’s forecast growth rate of 7.5% per annum in each of the next two years is taken into account, meaning that there’s perhaps limited upward rerating potential on offer.

As ever, Johnson Matthey is affected by the price of platinum and while in the long run it has considerable growth potential, in the shorter term it could prove to be rather volatile. As such, it may be prudent to await a wider margin of safety before piling into Johnson Matthey, although it remains a high quality business nonetheless.

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Peter Stephens owns shares of Aviva. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.