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The Aviva (LSE:AV.) share worth has loved some spectacular positive factors 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 normally have soared sharply, elevating fears of a bubble. Increased-than-forecast inflation and financial uncertainty imply that some imagine latest worth positive factors are exhausting to justify.
However Metropolis analysts don’t imagine Aviva’s share worth is about to come back crashing down. As a substitute, they predict that it’ll proceed rising.
Fifteen analysts at present have rankings 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 latest ranges.
However how sensible are such predictions? And will I purchase Aviva shares at this time?
Good buying and selling numbers
Whereas situations stay powerful 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 positive factors may properly be on the playing cards.
Common Insurance coverage gross written premiums (GWPs) at Aviva rose 16% within the first quarter, to £2.7bn, because of constructive pricing initiatives and new enterprise progress. Within the UK and Canada, GWPs elevated 19% and 11%, respectively.
Robust demand for its safety merchandise drove Safety and Well being gross sales 5%. In the meantime, greater bulk buy annuity (BPA) volumes pushed turnover at its Retirement division 19% greater.
Lastly, Aviva’s asset administration division additionally continued to carry out properly. Wealth web flows rose 15% yr on yr, to £2.7bn.
In nice form
I wasn’t stunned by the power of the agency’s newest replace.
Sure, shoppers have much less cash to mess around with in the meanwhile. However Aviva’s a market chief throughout a number of product classes, because the graphic above exhibits. It has the model energy to carry out robustly, even when the broader trade is struggling.
I imagine the enterprise is in good condition to proceed rising revenues, too. The insurance coverage, wealth, and retirement segments are tipped for regular progress because of demographic modifications (i.e., a quickly ageing inhabitants).
On high of this, Aviva’s drive to digitalise its operations can 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 following 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 believe 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 under half this stage, at 3.5%.
With the corporate trying so low-cost — and looking out good to proceed rising income over the long run — I believe it’s a high inventory to significantly take into account at this time.
