American International Group Inc Stock Hold Recommendation Reiterated (AIG)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- American International Group (NYSE: AIG) has been reiterated by TheStreet Ratings as a hold with a ratings score of C . The company's strengths can be seen in multiple areas, such as its solid stock price performance, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow, poor profit margins and feeble growth in the company's earnings per share.

Highlights from the ratings report include:
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. In comparison to the other companies in the Insurance industry and the overall market, AMERICAN INTERNATIONAL GROUP's return on equity significantly exceeds that of the industry average and is above that of the S&P 500.
  • AIG, with its decline in revenue, underperformed when compared the industry average of 13.1%. Since the same quarter one year prior, revenues slightly dropped by 0.5%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The gross profit margin for AMERICAN INTERNATIONAL GROUP is rather low; currently it is at 17.20%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 13.80% is above that of the industry average.
  • Net operating cash flow has declined marginally to $1,743.00 million or 7.33% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.

American International Group, Inc. engages in the provision of insurance products and services for the commercial, institutional, and individual customers in the United States and internationally. The company operates in three segments: Chartis, SunAmerica Financial Group, and Aircraft Leasing. The company has a P/E ratio of 2.9, above the average insurance industry P/E ratio of 2.7 and below the S&P 500 P/E ratio of 17.7. American International Group has a market cap of $56.19 billion and is part of the financial sector and insurance industry. Shares are up 42.7% year to date as of the close of trading on Wednesday.

You can view the full American International Group Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.
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