Credit Suisse Sees Voya Financial As A Top Pick

Analysts John Nadel, Wesley Carmichael and Michael Ward think that Voya's earnings from its current ongoing businesses are below its potentials and expects upside in ROE in the upcoming period. They pointed out that the company has reduced its outstanding shares by approximately 25 percent after the IPO three years ago.

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Additionally, the analysts expect Voya to buy back $600 million worth of shares in 2017 and 2018 each. As a result, there is a further potential of outstanding shares reduction by 9–10 percent per year.

Aside from these, the brokerage pointed out valuation metrics and viewed that the stock is the cheapest among its coverage based on adjusted free cash flow yield for 2017 and 2018, gains from business mix and the utilization of its DTA over time.

In a research note, Credit Suisse explained, "Our target price of $39 is based on our sum-of-the-parts valuation that assigns a P/E multiple of 8.9x to the ongoing business earnings and a value of $5 for the DTA, $1 for DRD and $0 for CBVA. We ascribe a value of $0 to CBVA as a base case based on our view of prolonged low interest rates and the effect on the NPV of cash flows from the segment."

The stock closed at $30.26 on Thursday.

Full ratings data available on Benzinga Pro.