MetLife, Inc. (NYSE:MET) shares are up more than 11.19% this year and recently decreased -1.71% or -$0.93 to settle at $53.40. Brighthouse Financial, Inc. (NASDAQ:BHF), on the other hand, is down -18.64% year to date as of 11/06/2017. It currently trades at $56.95 and has returned -8.41% during the past week.
MetLife, Inc. (NYSE:MET) and Brighthouse Financial, Inc. (NASDAQ:BHF) are the two most active stocks in the Life Insurance industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.
Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect MET to grow earnings at a 9.00% annual rate over the next 5 years. Comparatively, BHF is expected to grow at a 8.00% annual rate. All else equal, MET’s higher growth rate would imply a greater potential for capital appreciation.
Profitability and Returns
A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use Return on Investment (ROI) to measure this. MET’s ROI is 2.30% while BHF has a ROI of -16.70%. The interpretation is that MET’s business generates a higher return on investment than BHF’s.
MET’s debt-to-equity ratio is 0.33 versus a D/E of 0.18 for BHF. MET is therefore the more solvent of the two companies, and has lower financial risk.
MET trades at a forward P/E of 11.11, a P/B of 0.83, and a P/S of 0.99, compared to a forward P/E of 6.41, a P/B of 0.42, and a P/S of 1.58 for BHF. MET is the cheaper of the two stocks on sales basis but is expensive in terms of P/E and P/B ratio. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Analyst Price Targets and Opinions
A cheap stock isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. MET is currently priced at a -3.78% to its one-year price target of 55.50. Comparatively, BHF is -15.11% relative to its price target of 67.09. This suggests that BHF is the better investment over the next year.
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.30 for MET and 3.10 for BHF, which implies that analysts are more bullish on the outlook for BHF.
Brighthouse Financial, Inc. (NASDAQ:BHF) beats MetLife, Inc. (NYSE:MET) on a total of 6 of the 13 factors compared between the two stocks. BHF is growing fastly. In terms of valuation, BHF is the cheaper of the two stocks on an earnings and book value, BHF is more undervalued relative to its price target. Finally, BHF has better sentiment signals based on short interest.