Tuesday, 8 March 2016

Manulife Undervalued or a Value Trap

Manulife has left a lot of pain on the table for buy and hold investors. 2008 pulled the rug out from under the company, earnings and the dividend along with the share price took a massive hit. It’s taken nearly a decade for the company to find it’s footing again. It was a classic value trap. The good news is management did work out the issues.
Now the question is Manulife a buy?
Short Answer Yes

Management has enough faith in future earnings growth that they started increasing the dividend. Forwards earnings growth is 6% (1% in 2016 and 10% in 2017) The stock has now bottom out and is starting to look good. Yield has crossed the all important physiological barrier of 4%. This from Stockchase.com

Still suffering from its financial crisis hangover but that is gradually working its way through the system. 2012 was this company’s return to real profitability.

Looking at Fastgrapshs we see this. Earnings are growing (dark green area) and the blue line is the historical PE ratio. The black line is the current PE ratio. As you can see the stock is massively undervalued. 

Price Projection
Normal PE ratio 15
Current PE ratio 9.5
Price projects if returns to its normal PE ration
2016 $13 or 80% price gain
2017 $16 or 100% price gain
2018 $20 or 120% price gain

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