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The Aviva (LSE:AV.) share worth has loved some spectacular good points as hopes of rate of interest cuts have risen. At 491.2p per share, the FTSE 100 life insurer is now up 13% because the starting of 2024.
UK share costs basically have soared sharply, elevating fears of a bubble. Greater-than-forecast inflation and financial uncertainty imply that some imagine current worth good points are arduous to justify.
However Metropolis analysts don’t imagine Aviva’s share worth is about to return crashing down. As an alternative, they predict that it’ll proceed rising.
Fifteen analysts at the moment have scores on Aviva shares. And the typical 12-month worth goal amongst them stands at 510p per share. That means an increase of 4% from present ranges.
Some quantity crunchers are much more optimistic. The very best worth goal is 575p, which represents a whopping 17% premium to current ranges.
However how real looking are such predictions? And may I purchase Aviva shares right this moment?
Good buying and selling numbers
Whereas situations stay robust in its core markets, Aviva continues to carry out robustly, as newest buying and selling numbers this week present. If this continues, additional share worth good points may effectively be on the playing cards.
Basic Insurance coverage gross written premiums (GWPs) at Aviva rose 16% within the first quarter, to £2.7bn, due to optimistic pricing initiatives and new enterprise progress. Within the UK and Canada, GWPs elevated 19% and 11%, respectively.
Sturdy demand for its safety merchandise drove Safety and Well being gross sales 5%. In the meantime, larger bulk buy annuity (BPA) volumes pushed turnover at its Retirement division 19% larger.
Lastly, Aviva’s asset administration division additionally continued to carry out effectively. Wealth web flows rose 15% yr on yr, to £2.7bn.
In nice form
I wasn’t shocked by the power of the agency’s newest replace.
Sure, shoppers have much less cash to mess around with in the intervening time. However Aviva’s a market chief throughout a number of product classes, because the graphic above reveals. It has the model energy to carry out robustly, even when the broader business is struggling.
I imagine the enterprise is in fine condition to proceed rising revenues, too. The insurance coverage, wealth, and retirement segments are tipped for regular progress due to demographic adjustments (i.e., a quickly ageing inhabitants).
On high of this, Aviva’s drive to digitalise its operations can also be paying off handsomely. Its AI-driven pensions tracing service, Cloth, reported a 50%-plus enhance in switch inflows in 2023.
Too low-cost to disregard
However can Aviva’s share worth proceed rising over the subsequent yr, or is the excellent news priced in?
An unsure financial outlook and rate of interest setting may additionally hamper near-term worth progress. Nonetheless, I feel the cheapness of Aviva’s shares leaves loads of scope for it to proceed rising.
On the one hand, they now commerce on a ahead price-to-earnings (P/E) ratio of 11.7 instances. That is barely above the FTSE 100 common of 11 instances.
However additionally they deal on a corresponding price-to-earnings progress (PEG) ratio of 0.8. Any sub-1 studying suggests {that a} inventory is undervalued.
Lastly, Aviva’s 7.2% ahead yield additionally illustrates good worth for cash. The Footsie equal sits beneath half this degree, at 3.5%.
With the corporate wanting so low-cost — and searching good to proceed rising earnings over the long run — I feel it’s a high inventory to noticeably take into account right this moment.
