The QBE share price has gained 16% in a month. Is it still a ‘relatively inexpensive’ ASX 200 share?

Does the QBE Insurance share price have further to climb?

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Key points

  • QBE Insurance shares have been on a tear lately
  • The company is up 16% in the past month alone
  • But this ASX broker reckons it's got further to go...

As for many shares on the S&P/ASX 200 Index (ASX: XJO), the QBE Insurance Group Ltd (ASX: QBE) share price is having a pretty pleasant day of trading thus far. QBE shares are currently up a robust 1.12% at $11.70 after the company closed at $11.57 a share yesterday.

After these gains, QBE shares are now up by more than 16% over just the past month alone. So after this rather eye-catching run, could the QBE share price still be “relatively inexpensive”?

Well, that’s how ASX broker Morgans has just described QBE Insurance Group.

As my Fool colleague James covered this morning, Morgans has just put out its ‘best ideas for April’ list of ASX 200 shares. And QBE Insurance made the cut.

The broker rates QBE shares as an add, complete with a 12-month share price target of $13.50 a share. If that came to pass, it would represent an upside of 15.4% on the company’s current share price. That would be around 19% factoring in this company’s dividend (assuming payout consistency over the next year, of course).

Is the QBE share price cheap right now?

So why does Morgans like QBE shares right now? Here’s some of what the broker said:

With strong rate increases still flowing through QBE’s insurance book, and further cost-out benefits to come, we expect QBE’s earnings profile to improve strongly over the next few years. The stock also has a robust balance sheet and remains relatively inexpensive overall, trading on approximately 14x FY22F PE.

It’s that “approximately 14x FY22F PE” number that Morgans is using to call QBE “relatively inexpensive”. It means that on today’s share pricing, the company is trading on a price-to-earnings (P/E) ratio of approximately 14 times its full-year earnings for the 2022 financial year. A P/E ratio is an imperfect metric that can be used to assess how the market is pricing a company compared to its peers. Since every company reports its profits in the same currency, we can look at how the market values each business compared to its profits.

Morgans is asserting that QBE is “relatively inexpensive” because many other ASX shares have P/E ratios above that right now. For example, another ASX 200 insurance company, Suncorp Group Ltd (ASX: SUN), currently has a P/E ratio of 15.97. Commonwealth Bank of Australia (ASX: CBA) is trading with a ratio of 19.88. Thus, we can say that these companies are more expensive on a P/E basis compared to QBE.

So Morgan’s assessment will no doubt be welcomed by shareholders today.

At the current QBE share price, this ASX 200 insurance share has a market capitalisation of $17.12 billion.

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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