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Should I Buy Aviva?

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LONDON -- I'm shopping for shares right now, should I pop Aviva  (LSE: AV  ) (NYSE: AV  )  into my basket?

Problem play
How do you solve a problem like Aviva? it has been looking like a bargain buy for several years, and I'm not the only Fool dazzled by its low, low price. But now it is beginning to look more than a little shop soiled. Is it really a bargain? And should I buy more now, while it still looks cheap?

Insurer Aviva would try the patience of a saint. I bought it three years ago at around seven times earnings, seduced by its fat yield of nearly 8%. Subsequent share price performance has been dreadful. Aviva is down 6% in the past three years, against a 79% leap for Prudential  (LSE: PRU  ) (NYSE: PRU  ) and 95% blitz for Legal and General Group  (LSE: LGEN  ) . That's what you get for over-exposure to the toxic eurozone, and underexposure to booming Asia. Aviva's management cut the yield by 25% in March, further reducing its charms.

The Wilson years
Yet I have admired group CEO Mark Wilson's attempts to turn Aviva around. He has been slashing internal debt, boosting the balance sheet by offloading non-core and underperforming assets, and taking a knife to middle management. He also delivered 18% sales growth in the first quarter thanks to a strong performance in U.K. life, Turkey and Asia. Sadly, Wilson can't do much about southern Europe. But then, who can?

There have been signs of greater solidity, with Aviva's share price holding firm while L&G and Prudential fell 10% and 13%, respectively, in the past month. A quieter eurozone crisis has helped, while its rivals have been hit by growing worries in China. Prudential and Legal & General have been praised for stealing a march in Asia and emerging markets, leaving Aviva an embarrassing straggler, but that strategy is about to be tested. At least Aviva has aired all of its bad news and is cleaning up its act. The dividend cut is out there, and hopefully won't be repeated, yet it stands comparison with L&G (4.6%) and is a lot more generous than Prudential (2.8%).

Saint or sinner?
Trading at around eight times earnings, Aviva is a lot cheaper than L&G (12.1 times) and Prudential (13.5 times), and rightly so given recent lousy performance, which includes a 70% drop in earnings per share (EPS) in the 12 months to December 2011. But EPS is now on a forecast 9% to December 2014, giving ground for hope. I thought my patience with Aviva had snapped, but looking at these numbers, it still looks like the U.K. insurer to buy. You'll get your reward in heaven, my mother used to say, but with Aviva, it could take longer than that. How saintly do you feel?

You won't have to be so patient if you buy what Motley Fool analysts claim is the single best U.K. growth stock of this year. They like it so much, they have named it "Motley Fool's Top Growth Share for 2013." To find out more, download our free report. It won't cost you a penny, so click here now.

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