American Financial Group trades at $136.09 and has moved in lockstep with the market. Its shares have returned 7.8% over the last six months while the S&P 500 has gained 8.8%.

Is now the time to buy American Financial Group, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is American Financial Group Not Exciting?

We're cautious about American Financial Group. Here are three reasons there are better opportunities than AFG and a stock we'd rather own.

1. Net Premiums Earned Point to Soft Demand

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore gross premiums less what’s ceded to reinsurers as a risk mitigation and transfer strategy.

American Financial Group’s net premiums earned has grown at a 6.1% annualized rate over the last two years, slightly worse than the broader insurance industry and in line with its total revenue.

2. EPS Barely Growing

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

American Financial Group’s EPS grew at a weak 4.9% compounded annual growth rate over the last five years, lower than its 7.4% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

3. Substandard BVPS Growth Indicates Limited Asset Expansion

Book value per share (BVPS) serves as a key indicator of an insurer’s financial stability, reflecting a company’s ability to maintain adequate capital levels and meet its long-term obligations to policyholders.

To the detriment of investors, American Financial Group’s BVPS grew at a sluggish 5.6% annual clip over the last two years.

Final Judgment

American Financial Group’s business quality ultimately falls short of our standards. That said, the stock currently trades at 2.4× forward P/B (or $136.09 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're fairly confident there are better investments elsewhere. Let us point you toward an all-weather company that owns household favorite Taco Bell.

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