Why Manulife Financial Corp. Jumped 4.13% on Thursday

Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) rallied 4.13% on Thursday following its Q3 earnings release. What should you do now? Let’s find out.

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Manulife Financial Corp. (TSX:MFC)(NYSE:MFC), one of the largest financial services companies in the world, announced its third-quarter earnings results after the market closed on Wednesday, and its stock responded by rallying 4.13% in Thursday’s trading session. Let’s break down the quarterly results and the fundamentals of its stock to determine if we should be long-term buyers today.

The results that sent the stock higher

Here’s a quick breakdown of the 10 of most notable financial statistics from Manulife’s three-month period ended September 30, 2017, compared with the same period in 2016:

Metric Q3 2017 Q3 2016 Change
Net premium income $7.24 billion $7.20 billion 0.6%
Net investment income $2.15 billion $4.34 billion (50.5%)
Other revenue $2.54 billion $2.92 billion (12.9%)
Total revenue $11.93 billion $14.46 billion (17.5%)
Core earnings $1.09 billion $996 million 8.9%
Diluted core earnings per share (EPS) $0.53 $0.49 8.2%
Core return on equity 10.6% 9.8% 80 basis points
Assets under management and administration $1.01 trillion $966 billion 4.1%
Wealth and Asset Management net flows $4.01 billion $2.69 billion 48.8%
Book value per share $19.68 $19.92 (1.2%)

What should you do with Manulife’s stock now?

It was a solid quarter overall for Manulife, and its core EPS beat analysts’ expectations, which called for $0.52, so I think the 4.13% rally on Thursday was warranted. I also think the stock still represents a great investment opportunity for the long term for two fundamental reasons.

First, it’s still undervalued. Manulife’s stock has risen more than 14% year to date, but it still trades at just 12.2 times fiscal 2017’s estimated EPS of $2.21 and only 11.3 times fiscal 2018’s estimated EPS of $2.43, both of which are inexpensive compared with its five-year average multiple of 16; these multiples are also inexpensive given its current earnings-growth rate and its estimated 12.6% long-term earnings-growth rate.

Second, it has a high yield and a track record of dividend growth. Manulife currently pays a quarterly dividend of $0.205 per share, equating to $0.82 per share on an annualized basis, which gives it a 3% yield. Foolish investors must also note that the company has raised its annual dividend payment each of the last three years, and that its 10.8% hike in February has it on track for 2017 to mark the fourth consecutive year with an increase.

Manulife’s stock is up more than 24% since I first recommended it in February 2015, which does not even include reinvested dividends, and I think it still represents a great long-term investment opportunity today, so take a closer look and consider adding it to your portfolio.

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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