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Manulife Financial (MFC) on Growth Track: Should You Hold?

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Shares of Manulife Financial Corporation (MFC - Free Report) gained 28.24% in the last six months, outperforming the Zacks categorized Life Insurance industry’s growth of 22.44%. We expect the stock to retain its momentum on the back of a number of positives, such as growing asset management businesses and improving new business volumes (NBV) in Asia.



Manulife Financial continues to improve its inorganic growth portfolio through strategic acquisitions. We expect such business moves to accelerate the company’s growth and help it continue to witness improving results in the future.

Moreover, the company remains focused on developing its business in Asia, which is displaying solid operational performance. Notably, the Asia business now contributes one-third of the company’s earnings. In 2016, the division witnessed growth in core earnings owing to improved in-force business and continued augmentation in new business volumes in Asia. Manulife Financial expects to maintain its hold over the Asian markets, which in turn, will drive its long-term growth.

Further, the company continues to diversify its wealth and asset management business around the world. In 2016, the company’s Assets Under Management (AUM) grew substantially, primarily on continued net inflows from customers and solid investment performance.

The company’s long-term expected earnings growth is pegged at 10.20%, which is slightly better than the industry’s growth of 10.10%. Notably, Manulife Financial carries a VGM score of A. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores.

Currently, the Zacks Rank #3 (Hold) seems to be undervalued as the stock is trading at 12.32x price to earnings multiple over a period of six months. This compares favorably with the Life Insurance industry’s multiple of 14.15x. Also, Manulife Financial has a trailing 12-month return on equity (ROE) of 10.2%, which is higher than the industry average of 8.3%.

However, the currently volatile global equity markets and low bond yields have been largely affecting the company’s capital position. This, in turn, might lead the stock to underperform.

Stocks to Consider

Some better-ranked stocks from the insurance industry are Health Insurance Innovations, Inc. , Fidelity & Guaranty Life , Primerica, Inc. (PRI - Free Report) .

Health Insurance Innovations operates as a developer, distributor, and administrator of cloud-based individual health and family insurance plans, and supplemental products in the U.S. The company delivered positive surprises in all of the last four quarters with an average beat of 270.84%. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fidelity & Guaranty Life offers annuities and life insurance products in the U.S. The company delivered positive surprises in two of the last four quarters with an average beat of 15.85%. The company carries a Zacks Rank #2 (Buy).

Primerica distributes financial products to middle-income households in the U.S. and Canada. The company delivered positive surprises all of the last four quarters with an average beat of 6.37%. The company holds a Zacks Rank #2.

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