Aviva (LSE: AV) shares have been a top performer lately, but I’m wondering if I’m too late to the party.
In the last 12 months, they’ve jumped 22.7%. After the firm released a strong set of results on 7 March, the stock is up 7.4% alone.
Safe to say they’re soaring. So much so, the share price is the highest it has been since 2018.
I said following its results that I’d strongly consider adding Aviva shares to my portfolio if I had the cash. But since then, they’re up a further 5.2%. Is there any value left in the share price?
Assessing the stock
There are a few methods I could use to help me answer this. One is the price-to-earnings (P/E) ratio. The P/E ratio is found by dividing a stock’s price by the company’s earnings per share. For Aviva, its trailing P/E ratio is 13.2. That’s slightly above the FTSE 100 average around 11. However, Aviva is cheaper than a host of its peers including Prudential (15.8) and Admiral Group (25.6).
The business itself
Judging by that, it seems Aviva potentially still has some growing space. But let’s take a step back. Warren Buffett says to buy businesses, not stocks. With that, I want to dig a little deeper into Aviva as a company.
In my opinion, there’s plenty to like. Kicking things off with its cost-cutting mission, the firm has made solid progress in recent years when it comes to streamlining its operations.
It’s got rid of well over a dozen of its underperforming businesses. As it continues to slim down, there are talks of it disposing of further overseas operations in the months to come, including in India and China.
I think it’s a move that makes sense. Aviva has been streamlining for over a decade. Under its current CEO Amanda Blanc this has been catalysed. Last year the company revealed that it delivered its £750m cost reduction target a year ahead of schedule. Evidently, something seems to be working.
What I also like is its progressive dividend policy. As I write, Aviva shares offer investors a 6.7% yield. Last year, the business hiked its payout by 8% to 33.4p a share while also upgrading its dividend guidance to mid-single-digit growth on average each year. To go with that, it further revealed a £300m share buyback scheme.
Not without caution
That said, I’m wary of a few potential issues.
Streamlining is a smart move. Nevertheless, it leaves the business reliant on just a few core markets. Should they falter, this could spell trouble. For example, it’s forecast that growth in the UK economy will be lacklustre this year.
There’s also the risk of competition. The insurance industry is forever evolving. Threats from rising insurtechs could create problems for Aviva.
Room for more?
Nevertheless, as Aviva shares continue their upward trajectory, I think there’s still some room for growth going forward.
I like the steps the company has taken to restructure in recent years. What’s more, it’s an industry stalwart with strong brand recognition. Those are the sort of businesses I like to own.
If I had the cash, I’d still happily snap up some shares.
