Finding Quality In A Volatile Market: Primerica (PRI)

The incredibly long run of stability in capital markets has come to an end. No longer, as Ray Dalio points out, can investors make easy money betting on the stock market going up.

Change can be scary, but it can also create opportunity, especially as the market gets more efficient.

Now is the time when diligence matters most. And, there’s no better proof that diligence makes money for investors than the performance of the Bloomberg New Constructs Very Attractive Stocks Index, which has strongly out-performed he S&P 500 all year. It beat the S&P 500 by over 9% in 1Q2025.

Real alpha comes from going the extra mile and getting critical data that no one else has.

My Most Attractive Stocks Model Portfolio is proof that such research creates real alpha. I scour the entire market to find the gems in this Model Portfolio. I leverage my firm’s research to deliver you those companies with truly strong fundamentals and undervalued stock prices.

Today, I’m sharing a stock pick from my Most Attractive Stocks Model Portfolio.

This pick comes with a concise summary that gives you insight into the rigor of quality research and my approach to picking stocks. I’m proud to share my work, and I want to help investors when they need it most.

Most Attractive Stocks Pick: Primerica Inc (PRI)

Primerica Inc (PRI) has grown revenue and net operating profit after tax (NOPAT) by 9% and 18% compounded annually since 2014, respectively. Primerica’s NOPAT margin increased from 14% in 2014 to 30% in 2024 while its invested capital turns rose from 0.9 to 1.0 over the same time. Rising NOPAT margins and invested capital turns drive Primerica’s return on invested capital (ROIC) from 11% in 2014 to 30% in 2024.

Figure 1: Primerica’s Revenue and NOPAT Since 2014

PRI Is Undervalued

At its current price of $249/share, PRI has a price-to-economic book value (PEBV) ratio of 0.7. This ratio means the market expects Primerica’s NOPAT to permanently decline by 30% from 2024 levels. This expectation seems overly pessimistic for a company that has grown NOPAT by 18% compounded annually over the last decade and 20% compounded annually over the past five years.

Even if Primerica’s NOPAT margin falls to 20% (below 2024 NOPAT margin of 30% and equal to five-year average margin) and the company grows revenue by just 5% (below ten-year compound annual growth rate of 9%) compounded annually through 2034, the stock would be worth $309/share today – a 24% upside. In this scenario, Primerica’s NOPAT would grow just 1% compounded annually through 2034.

Should Primerica grow profits more in line with historical levels, the stock has even more upside.

Critical Details Found in Financial Filings by My Firm’s Robo-Analyst Technology

Below are specifics on the adjustments I made based on Robo-Analyst findings in Primerica’s 10-K:

Income Statement: I made under $600 million in adjustments, with a net effect of removing over $400 million in non-operating expense.

Balance Sheet: I made just under $1 billion in adjustments to calculate invested capital with a net increase of under $200 million. One of the most notable adjustments was for other comprehensive income.

Valuation: I made just under $100 million in adjustments, all of which decreased shareholder value. The most notable adjustment was for total debt.