For today’s content analysis, we will discuss about Sun Life Financial (SLF), for which the 2016 Q1 results were updated yesterday in StockPointer. For those interested to have a certain exposure to the insurance industry, Sun Life is one of the most interesting stocks, almost on par with Intact Financial (IFC), from a fundamental analysis perspective. Download
Sun Life’s economic performance has constantly been getting better over the past 5 years. The current return on capital of 13.6% is at a 5-year high, and it was almost at 0% in 2012. The cost of capital has also been decreasing, thus allowing the performance spread to increase even more every year. SLF’s clear economic performance improvement has had a direct impact on the stock’s intrinsic value, which is also constantly increasing since 2012. As of May 11th, the intrinsic value is at $53.94, representing an upside potential of about 25% based on yesterday’s close. The current P/IV of 0.8 is also one of the most attractive we have seen for SLF in the past 5 years.
The negative future growth value (FGV) of -8.9% also indicates that the stock trades at a discount, and this while the current operating value (COV) has been increasing steadily since late 2013.
The economic value added (EVA) is also progressing in a very linear and predictive fashion, and this increases our level of confidence in the model’s stability and ability to analyze the company.
Ending with the accounting performance, SLF unfortunately can’t brag about being a leader in terms of dividend growth, as it only increased them twice, and very lightly, since the ’08 crash. On the other hand, the dividend payout has always been healthy and is of only 41% today. The current dividend yield of 3.73% is thus not only quite attractive, but more importantly, it shouldn’t be at risk in the short term.