Is ING Poised to See a Recovery?

With shares of ING (NYSE:ING) trading around $11, is ING an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

ING is a global financial institution offering banking, investments, life insurance, and retirement services to meet the needs of the customers. The company’s segments include banking and insurance. It provides savings accounts, mortgage loans, consumer loans, credit card services, and investment products as well as current account services, payments systems, life and non-life insurance products, asset management products and services, and mortgage products. ING also offers commercial banking products and services, including lending products, payments and cash management, treasury and foreign exchange products, specialized and trade finance, corporate finance, mergers and acquisitions, and debt and equity capital markets advice.

ING has sold its South Korean life insurance unit to MBK Partners Ltd. for $1.7 billion. ING is being forced to sell its international operations by European regulators after it received bailout money during the financial crisis. The operation will keep the ING name for at least five years and ING gets a 10 percent indirect stake in the company.

T = Technicals on the Stock Chart are Strong

ING stock has recovered a bit after reaching lows last year. The stock is now trading near highs for the year and looks poised to continue this trend. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, ING is trading above its rising key averages, which signal neutral to bullish price action in the near-term.

ING

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of ING options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

ING Options

32.28%

60%

58%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

September Options

Flat

Average

October Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on ING’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for ING look like and more importantly, how did the markets like these numbers?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

-35.28%

138.06%

N/A

-66.08%

Revenue Growth (Y-O-Y)

-12.19%

-0.41%

N/A

-22.88%

Earnings Reaction

1.65%

N/A

N/A

N/A

ING has seen mixed earnings and decreasing revenue figures over the last four quarters. From these numbers, the markets have been pleased with ING’s recent earnings announcement.

P = Average Relative Performance Versus Peers and Sector

How has ING stock done relative to its peers Aegon (NYSE:AEG), Prudential (NYSE:PUK), Manulife Financial (NYSE:MFC), and sector?

ING

Aegon

Prudential

Manulife Financial

Sector

Year-to-Date Return

22.55%

15.53%

25.64%

22.37%

18.73%

ING has been an average relative performer, year-to-date.

Conclusion

ING is a financial services company providing service to consumers and companies around the world. The company is being forced to sell its South Korean life insurance unit by European regulators. The stock is now trading near highs for the year and looks poised to continue. Over the last four quarters, earnings have been mixed while revenues have been decreasing, however, investors in the company have been pleased with the company’s recent announcement. Relative to its peers and sector, ING has been an average year-to-date performer. Look for ING to OUTPERFORM.

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