43.2 Fantastic Reasons That May Make Aviva plc A Buy

Today I am spelling out why I believe shares in Aviva (LSE: AV) (NYSE: AV.US) should continue to move skywards as the firm’s transformation plan delivers stunning earnings growth.

Earnings expected to explode from this year

Shares in Aviva have exploded higher since April’s one-year lows, gaining 50% in the process and striking their highest since July 2011 above 440p in recent days. And I believe that the firm’s stock should keep heading higher as earnings surge — the City’s analysts are expecting earnings per share (EPS) to race to 43.2p in 2013, rebounding from losses of 15.2p per share last year.

The company’s half-year report in August revealed the sterling work which management has accomplished as part of its broad restructuring initiative, with cost-cutting measures continuing to run ahead of schedule. Indeed, a 9% reduction in operating expenses during January-June, to £1.53bn, helped to drive a 5% improvement in operating profit to £1.10bn. Restructuring costs also dropped 10% to £164m during the period, and Aviva expects this to fall even further from next year onwards.

Although Aviva’s restructuring plan was mainly responsible for the profits improvement during January-June, the company also proved that it is still a tough customer when it comes to generating new business. Indeed, the insurer saw the value of new business surge 17% in the first six months of the year, to £401m, underpinned by a 16% improvement in new UK business to £211m.

Aviva continues to benefit from its stellar reputation in the domestic insurance space, while the firm’s strength is also built around its diversity across a multitude of markets including the car, home, travel, health and life arenas.

The City’s  smashing earnings projections for 2013 currently leave Aviva trading on a P/E rating of 10.2, providing a sizeable discount to the current forward average of 14.6 for the complete life insurance sector and 16.5 for the wider FTSE 100.

And as EPS is expected to roll 9% higher in 2014, to 47.2p, this leaves Aviva dealing on a P/E rating of 9.3, just below the benchmark of 10 which represents stunning value for money. With a price to earnings to growth (PEG) readout bang on the bargain threshold of 1 for next year, too, I believe that Aviva is a great pick for those seeking an exceptional turnaround play at a great price.

Zone in on other spectacular stocks

But whether or not you share my enthusiasm for the life insurance leviathan, there are a whole host of other FTSE 100 winners just waiting to bolster your investment returns. In this regard I strongly recommend that you check out these recommendations from veteran fund manager Neil Woodford which are primed with explosive growth potential.

Woodford -- in charge of UK Equities at Invesco Perpetual -- has more than 30 years' experience in the industry, and boasts an exceptional track record when it comes to selecting stock market stars.

This exclusive report, compiled by The Motley Fool's crack team of analysts, is totally free and comes with no further obligation. Click here now to download your copy.

> Royston does not own shares in Aviva.