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How Aviva Measures Up As a GARP Investment

Royston Wild
June 18, 2013

LONDON -- A popular way to dig out reasonably priced stocks with robust growth potential is through the "Growth At A Reasonable Price," or GARP, strategy. This theory uses the price-to-earnings to growth (PEG) ratio to show how a share's price weighs up in relation to its near-term growth prospects -- a reading below 1 is generally considered decent value for money.

Today I am looking at Aviva (LSE: AV) (NYSE: AV) to see how it measures up.

What are Aviva's earnings expected to do?

  2013 2014
EPS Growth n/a 9%
P/E Ratio 8 7.4
PEG Ratio n/a 0.9

Source: Digital Look.

Aviva does not boast a valid earnings per share (EPS) growth figure in 2013, although this is a mathematical issue. EPS forecasts of 42.1 pence for this year compare with losses per share of 15.2 pence in 2012. Growth is expected to moderate to 45.7 pence next year, however.

The insurer fails to provide a valid PEG rating for this year owing to this projected earnings swing, although 2014's value falls within the bargain benchmark of 1. As well, the company's price-to-earnings (P/E) ratio registers at below 10 for the next two years -- a value below 1 is considered stunning value for money.

Does Aviva provide decent value against its rivals?

  FTSE 100 Life Insurance
Prospective P/E Ratio 14.8 12.8<