Is Genworth Financial Likely to Outperform?

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With shares of Genworth Financial Inc. (NYSE:GNW) trading at around $8.90, is GNW an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

The long-term care insurance business is the crux of the story here. In Q4, profits were $7 million, which was a big drop from $28 million for the same quarter a year ago. It turns out that long-term care policies were more costly than Genworth Financial had anticipated.

For Q4, EPS came in at $0.34, which was a 55 percent increase year-over-year. However, revenue came in at $2.54 billion, which was a 2.38 percent decrease year-over-year. Investors tend to look at revenue first. FY2012 EPS came in at $0.65 compared to $0.25 for FY2011. FY2012 revenue was $10.02 billion compared to $10.34 billion for FY2011.

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There were several insider purchases made in May of 2011, which proved to be good decisions. However, that kind of conviction hasn’t been seen as of late. Margins and cash flow are sub-par, but valuation looks good with a Forward P/E of 7.06.

Let’s take a lot at some more important numbers prior to forming an opinion on this stock…

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