Should You Buy Power Corporation of Canada Following its Strong Q4 Earnings Release?

Power Corporation of Canada (TSX:POW) released fourth-quarter earnings on March 18, and its stock reacted by falling over 1%. Should you buy shares today?

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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:

  1. Operating earnings increased 56% to $340 million
  2. Operating earnings increased 57.4% to $0.74 per share
  3. Other items, not included in operating earnings, increased 105.6% to $37 million
  4. Non-operating earnings decreased 66.7% to $0.06 per share
  5. Income from investments increased 72.7% to $57 million
  6. 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.

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.

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