Power Corporation of Canada (TSX: POW), one of the world’s largest diversified international management and holding companies that has interests in the financial services, communications, and media industries, announced fourth-quarter earnings results in the second-half of the trading session on March 18, and its stock responded by falling over 1%. Let’s break down the quarterly results to determine if we should consider using this weakness as a long-term buying opportunity.
Breaking down the fourth-quarter results
In the fourth quarter of fiscal 2014, Power Corporation’s net earnings increased 23% to $369 million, or $0.80 per share, compared to the $300 million, or $0.65 per share, earned in the same quarter a year ago. This strong performance was driven by the company’s power financial segment, which reported operating earnings growth of 30.6% to $346 million compared to the year-ago period.
Here’s a quick breakdown of six other notable statistics from the report compared to the year-ago period:
- Operating earnings increased 56% to $340 million
- Operating earnings increased 57.4% to $0.74 per share
- Other items, not included in operating earnings, increased 105.6% to $37 million
- Non-operating earnings decreased 66.7% to $0.06 per share
- Income from investments increased 72.7% to $57 million
- Operating and other expenses increased 5.9% to $36 million
Power Corporation also announced a 6.4% increase to its quarterly dividend to $0.3725 per share, and the next payment will come on May 1.
Is now the time to buy shares of Power Corporation of Canada?
I think the post-earnings weakness in Power Corporation’s stock represents a great long-term buying opportunity because it trades at inexpensive valuations and pays a very generous dividend.
First, Power Corporation’s stock trades at just 11.9 times fiscal 2014’s earnings per share of $2.77 and only 11 times fiscal 2015’s estimated earnings per share of $3.00, both of which are inexpensive compared to its five-year average price-to-earnings multiple of 12.3.
Second, the company now pays an annual dividend of $1.49 per share, which gives its stock a bountiful 4.5% yield at current levels, and I think this makes it qualify as both a value and dividend play today.
With all of the information above in mind, I think Power Corporation of Canada represents one of the best long-term investment opportunities in the market today. Foolish investors should take a closer look and strongly consider establishing positions.
