Shares in Aviva (LSE: AV) (NYSE: AV.US) have made a fantastic start to 2014, with the UK listed insurer up over 13% year-to-date while the FTSE 100 is down 1% over the same time period. Of course, Aviva is often sought by income-seeking investors due to its historically attractive yield (even after it cut its dividend per share in March 2013). However, does Aviva also have strong growth prospects? Can it really be considered a super growth stock?
Growth Expectations
After a challenging couple of years , during which Aviva slid into loss-making territory before returning to profitability in 2013, the company is forecast to post earnings per share (EPS) of just under 48p in 2014. This is impressive because it is a significant rise from 2012’s 22p per share and shows that, after a disappointing period, Aviva is able to bounce back into far more impressive levels of profitability.
Furthermore, Aviva is forecast to grow earnings in 2015 by 9%, which is a strong standalone figure but also compares favourably to FTSE 100 index peers, where the average forecast growth rate over the next year is still in the mid-single digits. Clearly, Aviva looks set to do more than hold its own as a growth play.
An Attractive Valuation
Despite offering above-average growth prospects, shares in Aviva are still relatively cheap. That’s because they trade on a price to earnings (P/E) ratio of just 10.7, which looks even more enticing when compared to the FTSE 100’s P/E of 13.3. Indeed, combining Aviva’s forecast growth rate in earnings with its P/E generates a price to earnings growth (PEG) ratio of 1.2. Although slightly above the PEG sweet-spot of 1.0, this is still impressive and shows that Aviva appears to offer a potent mixture of value and growth prospects.
Unstable Earnings?
As mentioned, Aviva has experienced a difficult period, from which it is now recovering. Of course, due to the nature of its business, Aviva may continue to post relatively volatile earnings numbers in future and it is, to an extent, a leveraged play on the wider index. However, with attractive growth prospects, a low valuation and a global economy that is continuing to return to health, Aviva could prove to be a super growth stock.
