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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Manulife Financial Corporation (NYSE:MFC) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Manulife Financial has a trailing twelve months PE ratio of 12.67. This level compares pretty favorably with the market at large, as the PE ratio for the S&P 500 comes in at about 20.50.
If we focus on the long-term trend of the stock, the current level puts Manulife Financial’s current PE among its lows over the past four years. This suggests that the stock is undervalued compared to its own historical levels and thus it could prove to be a suitable entry point from a PE perspective.
Further, the stock’s PE compares favorably with the Zacks classified Insurance – Life Insurance industry’s trailing twelve months PE ratio, which stands at 17.65. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
Broad Value Outlook
In aggregate, Manulife Financial currently has a Zacks Value Style Score of ‘A’, putting it into the top 20% of all stocks we cover from this look. This makes Manulife Financial a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, its P/CF ratio (another great indicator of value) comes in at 3.31, which is far better than the industry average of 4.43. Clearly, MFC is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Manulife Financial might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘F’ and a Momentum score of ‘C’. This gives MFC a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been trending upwards lately. The current quarter has seen one estimate go higher in the past thirty days compared to none lower, while the full year estimate has seen one upward revision and no downward revisions in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has remained constant in the past month, while the full year estimate has increased 1.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This positive trend signifies bullish analyst sentiment, and its Zacks Rank #1 (Strong Buy) indicates robust fundamentals and expectations of outperformance in the near term.
Bottom Line
Manulife Financial is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. With a formidable industry rank (among the Top 19% out of more than 250 industries) and strong Zacks Rank, Manulife Financial looks like a strong value contender. In fact, over the past one year, the Zacks Insurance – Life Insurance industry has clearly outperformed the broader market, as you can see below:
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