Pension, Investment and Insurance Company Voya Financial, Inc. (VOYA), which is based in New York, operates through three segments: Retirement; investment management; and Benefits. The company has an ISS Governance QualityScore of 2, indicating relatively low governance risk.
On December 21, S&P Dow Jones Indices announced that VOYA would be added to the S&P 500 Midcap 400 Index before market open on December 28, 2021.
The stock has gained 8.7% since the news broke to close yesterday’s trading session at $66.46.
Here’s what could shape VOYA’s performance in the short term:
Ambitious financial goals
VOYA aims to achieve an adjusted EPS growth rate of 12% to 17% per year through 2024. The company plans to fuel its growth through margin expansion, capital management and net revenue growth. It expects to achieve a free cash flow conversion of 90% to 100% over the next three years and to achieve an operational ROE in the range of 14% to 16%.
In this regard, VOYA President and CEO, Rodney O. Martin, Jr., said, “Our significant financial, operational and cultural transformation has enabled Voya to become a company focused on health, wealth and investment, with a clear focus on service to work and institutions. . Voya is now poised to generate greater success by providing valuable solutions centered around the growing needs of our clients and customers.
Mixed growth prospects
Analysts expect VOYA’s revenue to increase slightly in the current quarter (ending December 2021) and by 2.5% in the next quarter, but decline by 1.8% next year. However, consensus EPS estimates indicate a decline of 24.7% in the current quarter, a fall of 17.6% in the following quarter and a fall of 15.9% in 2022.
Rating lower than industry
In non-GAAP forward P/E terms, VOYA is currently trading at 0.37x, 26.3% below the industry average of 11.35x. The stock’s forward non-GAAP PEG multiple of 0.29 is 71.5% lower than the industry average of 1.03.
Additionally, VOYA’s price-to-sales and EV-to-sales ratios of 1.15 and 1.94, respectively, compare to industry averages of 3.39 and 2.88. Additionally, the stock’s forward EV/EBIT multiple of 9.43 is 20.2% lower than the industry average of 11.81.
Consensus Rating and Price Target Indicate Upside Potential
Of the five Wall Street analysts who rated VOYA, four rated it Buy while one rated it Hold. The $77.20 12-month median price target indicates a Upside potential of 16.2% from yesterday’s closing price of $66.46. Price targets range from a low of $75.00 to a high of $79.00.
POWR ratings reflect uncertainty
VOYA has an overall C rating, which equates to Neutral in our own POWR Rankings system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.
VOYA has a C rating for growth and quality. The company’s revenues have declined at a rate of 19.1% per year for the past three years. However, its EBITDA grew at a CAGR of 46.6% over this period, justifying the growth rating. Additionally, VOYA’s 43.96% 12-month net income margin is 46.8% higher than the industry average of 29.95%. However, the last 12 months of the company leveraged free cash flow the margin is negative, which is in line with the level of quality.
Of the 53 shares listed C Asset Management industry, VOYA is ranked #47.
In addition to the ratings I’ve highlighted, check out the VOYA ratings for Momentum, Sentiment, Stability, and Value here.
Conclusion
Rising employment and wages amid the global economic recovery will likely drive demand for VOYA’s service offerings in the coming months. Analysts expect the company’s revenue to grow over the next year. However, the company’s low cash flow is a concern. Over the past 12 months, VOYA’s net revenue was $4.50 billion, while its net operating cash inflow was $353 million. Additionally, the company’s leveraged free cash outflow was $3.52 billion. Against this backdrop, we believe investors should wait for VOYA’s cash flow to improve before investing in the stock.
How does Voya Financial, Inc. (VOYA) compare to its peers?
Although VOYA has a C rating in our proprietary rating system, one might consider looking at its industry peers, Silvercrest Asset Management Group Inc. (SAMG), Gamco Investors, Inc. (GBL) and Diamond Hill Investment Group, Inc. (DHIL), which have an A (Strong Buy) rating.
Shares of VOYA were trading at $66.70 per share Thursday morning, up $0.24 (+0.36%). Year-to-date, VOYA has gained 14.65%, compared to a 29.78% rise in the benchmark S&P 500 over the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the dos and don’ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing stocks. Following…
