Company ProfileÂ (excerpt from Reuters): Sun Life Financial Inc. (Sun Life Financial), incorporated on August 5, 1999, is the holding company of Sun Life Assurance Company of Canada (Sun Life Assurance). The Company is a financial services company providing a range of insurance, wealth and asset management solutions to individuals and corporate Clients. Sun Life Financial has operations in a range of markets around the world, including Canada, the United States, the United Kingdom, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China, Australia, Singapore, Vietnam, Malaysia and Bermuda. The Company operates through five segments: Sun Life Financial Canada (SLF Canada), SLF U.S., Sun Life Financial Asset Management (SLF Asset Management), SLF Asia and Corporate.
Downloadable PDF version of this valuation:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|Defensive Investor; must pass all 6 of the following tests.|
|1. Adequate Size of the Enterprise||Market Cap > $2Bil||$33,850,590,000||Pass|
|2. Earnings Stability||Positive EPS for 10 years prior||Fail|
|3. Dividend Record||Dividend Payments for 10 years prior||Pass|
|4. Earnings Growth||Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end||356.13%||Pass|
|5. Moderate PEmg Ratio||PEmg < 20||13.35||Pass|
|6. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||1.41||Pass|
|Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.|
|1. Earnings Stability||Positive EPS for 5 years prior||Pass|
|2. Dividend Record||Currently Pays Dividend||Pass|
|3. Earnings Growth||EPSmg greater than 5 years ago||Pass|
Stage 2: Determination of Intrinsic Value
|MG Growth Estimate||15.00%|
|MG Value based on 3% Growth||$57.77|
|MG Value based on 0% Growth||$33.86|
|Market Implied Growth Rate||2.43%|
|% of Intrinsic Value||34.68%|
Sun Life Financial Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.96 in 2014 to an estimated $3.98 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.43% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Sun Life Financial Inc revealed the company was trading below its Graham Number of $62.47. The company pays a dividend of $1.75 per share, for a yield of 3.3%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 13.35, which was below the industry average of 36.08, which by some methods of valuation makes it one of the most undervalued stocks in its industry.
Sun Life Financial Inc fares extremely well in the ModernGraham grading system, scoring an A-.
Stage 3: Information for Further Research
|Number of Consecutive Years of Dividend Growth||3|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||3/1/2018|
|Long-Term Debt & Capital Lease Obligation||$4,336,000,000|
|Shares Outstanding (Diluted Average)||615,000,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$4.75|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$3.98|
Other ModernGraham posts about the company
|4 Best Stocks for Value Investors This Week â€“ 1/28/17|
|Sun Life Financial Inc Valuation â€“ Initial Coverage $TSE:SLF|
Other ModernGraham posts about related companies
The author did not hold aÂ position in any company mentioned in this articleÂ at the time of publication and had no intention of changing that position within the next 72 hours. Â See my current holdings here. Â This article is not investment advice; any reader should speak to aÂ registeredÂ investment adviser prior to making any investment decisions. Â ModernGraham is not affiliated with the company in any manner. Â Please be sure to review our detailed disclaimer.