2 Numbers That Could Make Aviva plc A Stunning Buy

Today I am looking at why I believe Aviva (LSE: AV) (NYSE: AV.US) is a red-hot stock selection.

Here are two numbers that I think help make the case.


Despite the effect of macroeconomic pressure in emerging markets, life insurance giant Aviva continues to enjoy the fruits of low product penetration in these regions and subsequently solid pent-up demand. And with population levels in these areas continuing to stride forwards and disposable incomes heading higher, I believe that Aviva’s success in developing markets is set to last.

Indeed, the business saw the value of new business from Asia alone surge 47% during January-September, at constant exchange rates, to £97m. Not surprisingly this region was again the best performer during the period, although Aviva also reported solid progress in its Polish growth market — new business values here rose 40% during the nine months, to £46m.

Alongside a strong turnaround in its European businesses, success in emerging markets helped to drive the value of all new business at Aviva 15% higher in January-September, to £686m. Sales from Asia alone now account for 14% of the group total, up from 11% last year, and news that a strong product mix — combined with solid demand for protection products in the continental hotbed of China — underpins my bullish view on Aviva’s revenues outlook in these regions.


Even though Aviva’s share price has experienced a tumultuous ride during 2014, the insurer has insulated itself from the worst of the risk aversion that has damaged stock markets this year. Indeed, while the FTSE 100 has conceded 1% in the year to date, Aviva has risen 18% and recently topped out at six-year highs of 537p per share.

Despite this exceptional growth, Aviva is still an extremely attractive value stock based on current earnings forecasts. An expected 114% explosion in the bottom line this year leaves the company changing hands on a P/E multiple of 11.3 times prospective earnings, trashing a forward reading of 13.9 times for the complete life insurance sector.

And an extra 6% earnings uptick chalked in for next year drives Aviva’s reading still lower, to just 10.7 times and just above the value benchmark of 10 times or below which is generally regarded as a steal.

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Royston Wild has no position in any shares mentioned. 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.