Why Sun Life Financial Inc. Is Rallying Over 3%

Sun Life Financial Inc. (TSX:SLF)(NYSE:SLF), one of the world’s largest insurance companies, released its fiscal 2017 fourth-quarter and full-year earnings results after the market closed yesterday, and its stock has responded by rallying over 3% at the open of trading today. Let’s break down the earnings results and the fundamentals of its stock to determine if we should be long-term buyers.

Breaking it all down

Here’s a breakdown of eight of the most notable statistics from Sun Life’s three-month period ended December 31, 2017, compared with the same period in 2016:

Metric Q4 2017 Q4 2016 Change
Insurance sales $1,106 million $1,071 million 3.3%
Wealth sales $35,300 million $37,250 million (5.2%)
Adjusted premiums and deposits $43,420 million $43,117 million 0.7%
Total revenue $8,648 million $2,366 million 265.5%
Underlying net income $641 million $560 million 14.5%
Underlying earnings per share (EPS) $1.05 $0.91 15.4%
Underlying return on equity (ROE) 12.7% 11.4% 130-basis-point improvement
Book value per common share $32.86 $32.10 2.4%

And here’s a breakdown of 10 notable statistics from its 12-month period ended December 31, 2017, compared with the same period in 2016:

Metric Fiscal 2017 Fiscal 2016 Change
Insurance sales $3,042 million $2,758 million 10.3%
Wealth sales $145,314 million $138,319 million 5.1%
Adjusted premiums and deposits $170,534 million $161,217 million 5.8%
Total revenue $29,334 billion $28,573 billion 2.7%
Underlying net income $2,546 million $2,335 million 9.0%
Underlying EPS $4.15 $3.80 9.2%
Underlying ROE  12.7% 12.2% 50-basis-point improvement
Total assets under management $974,785 million $903,275 million 7.9%
Book value per common share $32.86 $32.10 2.4%
Dividends per common share $1.745 $1.62 7.7%

What should you do with Sun Life’s stock today?

It was a great quarter overall for Sun Life, and it capped off a fantastic year for the company, so I think the +3% pop in its stock is warranted; furthermore, I think the stock represents a very attractive long-term investment opportunity today for two fundamental reasons in particular.

First, it’s still undervalued. Sun Life’s stock currently trades at just 12.9 times fiscal 2017’s underlying EPS of $4.15 and only 11.7 times the consensus estimate of $4.57 for fiscal 2018, both of which are very inexpensive given its current earnings-growth rate and its estimated 8.2% long-term earnings-growth rate; these multiples are also inexpensive compared with its five-year average multiple of 15.4.

Second, it has a high dividend with a track record of growth. Sun Life currently pays a quarterly dividend of $0.455 per share, equating to $1.82 per share annually, which gives it a rich 3.4% yield. Investors must also note that the company’s 4.6% dividend hike in November has it on track for 2018 to mark the fourth straight year in which it has raised its annual dividend payment, and I think its strong growth of underlying net income will allow this streak to continue for many years to come.

With all of the information provided above in mind, I think all Foolish investors should strongly consider beginning to scale in to positions in Sun Life over the next couple of trading sessions.

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

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