How Will Genworth Financial (GNW) Stock Respond After Investigation For Alleged Securities Law Violations?

NEW YORK (TheStreet) -- Shares of Genworth Financial  (GNW) are down following an announcement that the company is under investigation for potential claims concerning alleged violations of federal securities law by law firm Glancy Binkow & Goldberg LLP. 

The firm said the investigation on behalf of Genworth's investors focuses on certain statements issued by the company concerning its business and financial prospects. 

Genworth CEO Tom McInerney, who told investors in December 2013 that the company had adequate reserves for coverage, said yesterday, that he was speaking then about a broad measure of its finances, and "never said in the overall discussion that we wouldn't have quarterly volatility", Bloomberg reports.

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An analyst at Morgan Stanley said, "Genworth had downplayed the risk of a reserve charge", Bloomberg added.

Yesterday, after Genworth said it was reviewing whether enough funds had been set aside for claims, the company's shares fell the most since 2012.

Genworth Financial stock is down -5.15% to $13.26 today.

Separately, TheStreet Ratings team rates GENWORTH FINANCIAL INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate GENWORTH FINANCIAL INC (GNW) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth, compelling growth in net income, revenue growth and attractive valuation levels. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • GENWORTH FINANCIAL INC has improved earnings per share by 29.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, GENWORTH FINANCIAL INC increased its bottom line by earning $1.15 versus $0.55 in the prior year. This year, the market expects an improvement in earnings ($1.42 versus $1.15).
  • The net income growth from the same quarter one year ago has greatly exceeded that of the S&P 500, but is less than that of the Insurance industry average. The net income increased by 24.8% when compared to the same quarter one year prior, going from $141.00 million to $176.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.7%. Since the same quarter one year prior, revenues slightly increased by 1.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • You can view the full analysis from the report here: GNW Ratings Report
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