Investors looking for a top undervalued stock to add to their portfolios certainly have a range of options to choose from in the TSX. The Canadian stock market is relatively undervalued compared to the U.S. market, with varying opportunities that I think investors can readily explore right now.
One such top company I’ve been pounding the table on for a long time is Manulife Financial (TSX:MFC). As the company’s stock chart below shows, this is a company that’s finally found its footing. The question is whether this stock is still undervalued at current levels and where this stock could be headed from here.
Here’s the bull case behind why Manulife still looks undervalued and why this is a company I’d still consider at current levels.
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Solid financials and excellent stability
One of the most important factors I think investors should look at when it comes to picking stocks of any kind (especially value picks) is a given company’s financial stability. On this front, Manulife exhibits a number of traits I think make the stock a standout among its peers.
For one, the company’s status as a leading insurance giant with a growing wealth management business positions the company for steady and consistent growth. Much of Manulife’s expansion has been focused on Asian markets, which continue to see strong rates of adoption for key services such as wealth management offerings, with Manulife growing its market share in these important markets in a big way.
Thus, while the company is well known in the Canadian market and has a strong North American presence, it is a top global insurance player that should see continued earnings per share growth over time. Operating in 11 Asian markets, with strong upside relative to economic growth in these areas, the company has been able to realize impressive growth rates in premiums and new insurance sales.
Digital transformation
In addition to a strong and growing core business, Manulife has been intently focused on its digital transformation, looking to enhance its operational efficiency and improve the customer experience over time.
The company’s “digital first” approach appears to have paid off, with various improvements seen in the customer onboarding process, claims processing and management of internal accounts. These are the kinds of innovations investors want to see, with clear bottom-line impacts the company has seen in recent quarters.
These efforts have also aided the company in its cost-cutting initiatives, which have further improved the company’s profit margins and led to additional innovations investors believe can deliver greater return on investment over time. I think the company’s overall focus on innovation, technological integration, and improving its core efficiency has made this undervalued stock one to consider. Trading at just 16 times trailing earnings with a 3.5% dividend yield, this is a stock that still looks attractive even after its recent rally higher.
