Should You Buy Sun Life Financial Inc. Today?

Sun Life Financial Inc. (TSX:SLF)(NYSE:SLF) released fourth-quarter earnings after the market closed on February 11 and its stock has reacted by moving lower. What should you do with the stock now?

| More on:

Sun Life Financial Inc. (TSX:SLF)(NYSE:SLF), one of the world’s leading financial services organizations, announced fourth-quarter earnings after the market closed on February 11 and its stock has responded by falling over 2%. Let’s take a thorough look at the results to determine if we should consider using this weakness as a long-term buying opportunity, or as a warning sign to avoid the stock for the time being.

Breaking down the fourth-quarter results

Here’s a chart of Sun Life’s fourth-quarter earnings compared to its results in the same period a year ago.

Metric Q4 2014 Q4 2013
Underlying EPS from continuing operations $0.59 $0.61
Adjusted revenue $6.13 billion $6.20 billion

Source: Sun Life Financial

Sun Life’s diluted underlying earnings per share decreased 3.3% and its adjusted revenue decreased 1.1% compared to the fourth quarter of fiscal 2013. The company’s slight decline in earnings per share can be attributed to underlying net income from continuing operations decreasing 4% to $360 million, and its slight decline in revenue can be attributed to net premium revenue decreasing 4.4% to $2.7 billion for the quarter.

Here’s a quick breakdown of 12 other notable statistics and updates from the report compared to the year-ago period:

  1. Interest and other investment income increased 6.2% to $1.26 billion.
  2. Fee income increased 12.6% to $1.17 billion.
  3. General fund assets increased 13% to $139.42 billion.
  4. Segregated fund assets increased 10.2% to $83.94 billion.
  5. Mutual funds, managed funds, and other assets under management increased 16.1% to $511.09 billion.
  6. Total assets under management (AUM) increased 14.8% to $734.44 billion.
  7. Total adjusted premiums and deposits decreased 3% to $30.89 billion.
  8. Total capital increased 6.3% to $21.74 billion.
  9. Operating return on equity (ROE) contracted 510 basis points to 12.6%.
  10. Book value per share increased 11.2% to $26.87.
  11. Market capitalization increased 12.2% to $25.7 billion.
  12. Ended the quarter with $6.82 billion in cash and cash equivalents, an increase of 10.6% from the third quarter.

Sun Life announced that it will be maintaining its quarterly dividend of $0.36 per share, and the next payment will come on March 31 to shareholders of record at the close of business on February 25.

Is now the time to invest in Sun Life Financial?

Sun Life Financial is one of the world’s leading providers of financial products and services, but year-over-year declines in earnings per share and revenue in the fourth quarter has caused its stock to fall over 2%.

Even though I think the post-earnings weakness in Sun Life’s stock is warranted, I also think it represents an intriguing long-term buying opportunity. I think this because the stock trades at very inexpensive valuations, including just 13.8 times fiscal 2014’s earnings per share of $2.96, only 12.3 times fiscal 2015’s estimated earnings per share of $3.32, and a mere 1.5 times its book value per share of $26.87.

In addition, the company pays an annual dividend of $1.44 per share, which gives its stock a bountiful 3.5% yield at current levels and makes it both a value and dividend play today.

With all of the information provided above in mind, I think Sun Life Financial represents one of the best long-term investment opportunities in the financial sector today, so Foolish investors should take a closer look and strongly consider initiating positions.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned.

More on Investing

oil tank at night
Energy Stocks

3 Super-Cheap TSX Energy Stocks to Buy Right Now

Here are three top undervalued TSX energy stocks to play the next leg of the crude oil rally.

Read more »

Hand arranging wood block stacking as step stair with arrow up.

5 Growth Stocks to Buy Before the Bear Market Is Over

Now is a great time to pick up growth stocks that can see shares soar in the next few years,…

Read more »

clock time

Fresh Take: These 3 TSX Stocks Are Super-Timely Buys

Here are three discounted TSX stocks to buy before the market goes on a raging bull run.

Read more »

money cash dividends
Tech Stocks

The Best TSX Stocks to Invest $5,000 in Right Now

These Canadian stocks have the potential to beat the broader market averages in the long term and generate solid capital…

Read more »

Choice of fashion clothes of different colors on wooden hangers

2 Retail Stocks That Are Too Cheap to Ignore

Canadian retail stocks such as Aritzia and Lululemon Athletica are well poised to deliver market-beating returns to investors.

Read more »

A bull and bear face off.

2 Stocks That Could Do Even Better in a Recession

Dollarama (TSX:DOL) and North West Company (TSX:NWC) stock are top defensives to help you retain wealth in a bear market.

Read more »

grow dividends
Tech Stocks

3 Monster Stocks to Buy Without Hesitation

Are you looking for great stocks to buy today? Here are three monster stocks you should buy without hesitation!

Read more »

data analyze research
Dividend Stocks

TFSA: Invest $29,000 in These 3 Stocks and Earn $515 Each Month in Passive Income in 2023

The benefits of the TFSA can be leveraged to hold a basket of dividend stocks and generate a stream of…

Read more »