If you are looking at Manulife Financial and wondering whether the current share price still offers value, this article will walk through what the numbers are really saying about the stock.
Manulife shares last closed at C$49.23, with returns of a 1.7% decline over the past week, a 2.8% decline over the past month, and a 1.1% decline year to date, compared with a 19.3% gain over the past year and a very large gain over the past three years and five years.
Recent news coverage has focused on Manulife’s position as a major North American insurer and asset manager, including commentary on its capital strength, product mix, and exposure to interest rate trends. This context helps frame how investors are reacting to the stock today, especially after its strong multi year performance.
On our valuation checks, Manulife Financial scores 3 out of 6, as shown by its valuation score of 3, and next we will walk through those valuation methods, before finishing with a different way to think about what the market might be pricing in.
The Excess Returns model looks at how much profit a company is expected to generate over and above the return that investors require on its equity, and then adds that amount to the underlying book value per share.
For Manulife Financial, the starting point is its book value of CA$28.89 per share and an average return on equity of 17.49%. Based on analyst estimates, this translates into stable earnings of CA$5.37 per share, with a cost of equity of CA$1.92 per share. The difference between those two figures, CA$3.45 per share, is the estimated excess return that Manulife can generate.
The model also uses a stable book value estimate of CA$30.69 per share, again based on weighted forecasts from 7 analysts. These inputs are combined to arrive at an intrinsic value of CA$132.59 per share for Manulife, using the Excess Returns framework.
Compared with the recent share price of CA$49.23, this Excess Returns valuation implies the stock is 62.9% undervalued on these assumptions.
For a profitable business like Manulife Financial, the P/E ratio is a useful shorthand for what investors are currently willing to pay for each dollar of earnings. It directly links the share price to earnings, which is often the main driver of long term returns.
What counts as a “normal” or “fair” P/E depends on how the market views a company’s growth prospects and risk. Higher expected growth and lower perceived risk can justify a higher P/E, while slower growth or higher risk usually point to a lower multiple.
Manulife’s current P/E is 15.72x. That sits above the Insurance industry average of 12.34x and above the peer group average of 13.99x, so the stock trades at a premium to both those simple benchmarks.
Simply Wall St’s Fair Ratio for Manulife is 16.83x. This is a proprietary estimate of the P/E that might be reasonable given factors such as the company’s earnings growth profile, industry, profit margins, market cap and risk characteristics. Because it blends these inputs, the Fair Ratio can offer a more tailored reference point than a broad industry or peer average.
Comparing the Fair Ratio of 16.83x with the current P/E of 15.72x suggests the shares are trading below that modelled fair level.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. These are simply your own story about Manulife Financial, linked to a clear forecast for revenue, earnings and margins, and then translated into a Fair Value that you can compare with the current share price to decide whether the stock looks attractive or stretched.
On Simply Wall St’s Community page, used by millions of investors, Narratives sit on top of the same numbers you have just seen. They let you plug in your assumptions and see how that flows through to a Fair Value that automatically refreshes when new earnings, news or guidance are added. That contrast between Fair Value and price is what helps you decide if you want to act or wait.
For example, one Manulife Narrative might echo the higher analyst price targets around CA$50.00 or the platform Fair Value of CA$54.67, built on the revenue growth, margin and future P/E estimates already laid out. Another might lean closer to the cautious CA$39.00 view, and seeing those different stories side by side makes it easier for you to decide which one matches your own expectations.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include MFC.TO.
