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Why Manulife Financial Corp. Jumped 4.13% on Thursday

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.

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

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