Aviva share price gets overbought ahead of earnings: is it a buy?

May 17, 2024 03:02 AM PDT | By Invezz

Aviva share price gets overbought ahead of earnings: is it a buy? — Image source: Invezz

Transformation continues

Aviva, the giant insurance company, has gone through a remarkable comeback helped by Amanda Blanc’s transformation. It has simplified its operations by exiting some of its international markets like Canada, Singapore, and France.

The remaining company focuses on the UK, Ireland, and Canadian business focusing on insurance, wealth, and retirement. It has also sought to solidify its domestic market through acquisitions. It recently acquired AIG’s UK protection business in a £435 million deal. It also acquired Probitas in a £242 million deal that saw it enter the Lloyd’s market.

Aviva’s turnaround has made it to be a highly-profitable company. The most recent annual results revealed that Aviva’s adjusted operating profit rose to £1.46 billion in 2023. Its gross written premiums jumped to over £10.8 billion while its wealth inflows jumped by over £8.3 billioN.

Most importantly, Aviva has become a great company for income-focused investors. It has returned over £3 billion to investors through dividends and buybacks in the past three years, a substantial sum for a company valued at over £13.3 billion. Its dividend yield stands at 6.76%, higher than what US gilts are offering.

Aviva has also boosted its revenue and dividend guidance. It hopes that its operating profit will jump to £2 billion by 2026 while its cash remittances to £5.8 billion.

Aviva’s performance makes it a highly undervalued company as it has a PE ratio of just 10.5, a strong dividend yield, and is growing its market share. In contrast, a company like Allianz has a PE multiple of 12.4 while Chubb, which Berkshire Hathaway has invested in, has a multiple of 11.5. The next key catalyst for Aviva’s stock will be its first quarter earnings set for May 23rd.

Another catalyst is that Aviva could become a takeover target, especially from Allianz, AXA, or Zurich Insurance.

Aviva share price forecast

AV chart by TradingView

The weekly chart reveals that the AV stock price has done well recently. It has soared to a record high of almost 500p, much higher than the year-to-date low of 400p. It also jumped above the crucial resistance point at 410p, its highest swing in 2023.

The stock has constantly remained above the 50-week and 100-week Exponential Moving Averages (EMA), a positive sign. However, oscillators like the Relative Strength Index (RSI) and the Stochastic Oscillator have all moved to the overbought level.

Therefore, the long-term outlook for the company is bullish. However, there is a likelihood that a pullback will happen after earnings as investors start to take profits.

The post Aviva share price gets overbought ahead of earnings: is it a buy? appeared first on Invezz

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