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.
