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Manulife Financial Continues to Outperform: Should You Hold?

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Shares of Manulife Financial Corporation (MFC - Free Report) have been on an uptrend and have gained 17.56% year to date, outperforming the Zacks categorized Life Insurance industry that gained 0.49%. The Zacks Rank #3 (Hold) life insurance company has witnessed its full-year estimates moving north over the last 30 days.

 


Why the Stock Should be in Your Portfolio

Manulife is aggressively developing its business in Asia, which in turn, is boosting operational results. Notably, the Asia business now contributes one-third of the company’s earnings. This market looks attractive, given its changing demographics that show that the region’s population is getting wealthier and older fast. The company has been undertaking several strategic initiatives – securing and deepening strategically important distribution agreements, making acquisitions – to capitalize on the growing opportunities.

Manulife is expanding its wealth and asset management business worldwide. Manulife Asset Management has identified Europe (and the wider EMEA market) as an important area for growth. This has prompted the life insurer to make long-term investments in this particular region.

Manulife has been enhancing its shareholders’ value by increasing dividend. The company currently has a dividend yield of 3.18%, which compares favorably with the industry average of 1.74%. This not only retains investor confidence but also the stock an attractive pick for yield seeking investors.

Valuation is also attractive at present as the stock is currently trading at a forward P/E of 12.9x, a 8.5% discount to the industry average of 14.1x. On a price-to-book basis, shares are trading at 1.1x compared with the industry average of 1.7x. Axis Capital has a trailing 12-month return on equity (ROE) of 9.1%, which is higher than the industry average of 7.0%.

The long-term expected earnings growth is pegged at 11.3% as against the industry average of 8.8%. Also, the price earnings growth ratio, which determines the relative trade-off between the price of a stock, the earnings generated per share, and the company's expected growth, is 1.13, which is above the industry average of -0.53.  Notably, Manulife Financial carries a VGM score of B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores.

Stocks to Consider

Some better-ranked insurers are Health Insurance Innovations, Inc , Primerica, Inc. (PRI - Free Report) and. FBL Financial Group Inc. .

Health Insurance, which is a developer, distributor, and administrator of cloud-based individual health and family insurance plans, and supplemental products in the U.S., beat estimates in all of the last four quarters with an average positive surprise of 270.8%. The company sports Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.   

Primerica – a distributor of financial products to middle income households in the U.S. and Canada – delivered positive surprises in the trailing four quarters with an average beat of 6.4%. The company has Zacks Rank #2 (Buy).

FBL Financial, which sells annuity and individual life insurance products, surpassed estimates in two of the last four quarters with an average positive surprise of 3.26%. The company carries Zacks Rank #2.

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