Over the past six months, American Financial Group’s shares (currently trading at $126.21) have posted a disappointing 7.9% loss, well below the S&P 500’s 5.4% gain. This was partly due to its softer quarterly results and might have investors contemplating their next move.

Is there a buying opportunity in American Financial Group, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Even with the cheaper entry price, we don't have much confidence in American Financial Group. Here are three reasons why you should be careful with AFG and a stock we'd rather own.

Markets consistently prioritize net premiums earned growth over investment and fee income, recognizing its superior quality as a core indicator of the company’s underwriting success and market penetration.

American Financial Group’s net premiums earned has grown at a 6.6% annualized rate over the last two years, slightly worse than the broader insurance industry and in line with its total revenue.

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

American Financial Group’s EPS grew at a weak 2.7% compounded annual growth rate over the last five years, lower than its 6.7% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

Book value per share (BVPS) serves as a key indicator of an insurer’s financial stability, reflecting a company’s ability to maintain adequate capital levels and meet its long-term obligations to policyholders.

To the detriment of investors, American Financial Group’s BVPS grew at a sluggish 6.5% annual clip over the last two years.

American Financial Group isn’t a terrible business, but it isn’t one of our picks. After the recent drawdown, the stock trades at 2.2× forward P/B (or $126.21 per share). This valuation tells us a lot of optimism is priced in - we think there are better opportunities elsewhere. We’d recommend looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.

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