Manulife Financial Corporation (TSE:MFC) saw a double-digit share price rise of over 10% in the past couple of months on the TSX. With many analysts covering the large-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Let’s examine Manulife Financial’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What is Manulife Financial worth?
The stock seems fairly valued at the moment according to my relative valuation model. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Manulife Financial’s ratio of 8.44x is trading slightly below its industry peers’ ratio of 12.8x, which means if you buy Manulife Financial today, you’d be paying a reasonable price for it. And if you believe Manulife Financial should be trading in this range, then there isn’t much room for the share price grow beyond where it’s currently trading. Is there another opportunity to buy low in the future? Since Manulife Financial’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Manulife Financial?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Manulife Financial’s earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? MFC’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at MFC? Will you have enough conviction to buy should the price fluctuate below the true value?
Are you a potential investor? If you’ve been keeping an eye on MFC, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for MFC, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Manulife Financial. You can find everything you need to know about Manulife Financial in the latest infographic research report. If you are no longer interested in Manulife Financial, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.