Like other financial stocks, insurance company Assurant (AIZ) - Get Report , has seen its stock price jump more than 30% over the past year.

With further interest rates hikes around the corner, Assurant could bring investors sizeable returns.

A Fortune 500 company, Assurant focuses on the housing and lifestyle markets. The company has received significant traction in the mobile device, consumer appliances, and vehicle protection services.

With approximately $30 billion in assets as of December 2016, Assurant is a relatively small insurer. Berkshire Hathaway (BRK.A) - Get Report (BRK.B) - Get Report , Allianz, Zurich Insurance (ZFSVF) , Aviva (AIVAF) and Sun Life Financial (SLF) - Get Report are all much bigger in size.

However, to its credit Assurant has managed to piece together annual revenue of $7 billion to more than $10 billion over the past few years. The company's earnings per share also peaked last year at $9.23.

Net income increased to $565.4 million in 2016 compared to $141.6 million in 2015, on account of smaller losses and exit-related charges from Assurant Health's runoff operations.

While insurance as a sector is often baffling for the lay-investor, one should look at Assurant as an income stock with a 2.1% yield and track record of paying 13 years of rising payouts. About $995 million were returned to shareholders in share repurchases and dividends in 2016.

As a result, price-to-cash flow (P/CF) is of strategic importance.

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AIZ trades at 45.6 times cash flow compared to the industry average of 11.8 times and Assurant's trailing 5-year average of 19.5 times. The S&P 500 trades at 12.6 times.

Clearly, Wall Street offers premium valuation to Assurant. With five-year earnings growth estimates of 26%, Assurant is poised to deliver solid earnings.

For 2017, Assurant has guided operating income to remain approximately level with 2016's levels.

Assurant trades at a price-to-book value (P/B) of 1.3 times. While this is lower than the Aon plc's (AON) - Get Report5.7 times, Assurant doesn't trade cheaper against sector peers like RenaissanceRe Holdings (RNR) - Get Report at 1.3 times, Endurance Specialty Holdings (ENH) at 1.27 times and Allied World Assurance (AWH) at 1.3 times P/B.

The above valuation analysis clearly indicates that Assurant is currently priced to perfection.


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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.