Manulife Financial (TSX: MFC) and Sun Life Financial (TSX: SLF) are two of Canada’s best-known financial stocks. The former is an insurance company that also offers bank-like services; the latter is primarily a life insurance company. The two companies are alike in that they both offer life insurance. They differ in the range of services offered and also in financial details and valuation. In this article, I will explore MFC and SLF stocks side by side and share which one I would prefer to invest $10,000 in for income.
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Growth
There is no clear winner between Manulife and Sun-Life Financial when it comes to growth. Manulife grew faster in the trailing 12-month (TTM) period, but Sun Life has grown more over the long term.
Manulife’s TTM growth rates in revenue, earnings and cash flows were as follows:
- Revenue: 10%
- Earnings: 8.8%
- Operating cash flow: 29%
Its five-year compounded growth rates in these metrics were as follows:
- Revenue: -17%
- Earnings: 0.50%
- Operating cash flow: N/A
As you can see, Manulife’s recent growth is offset by longer-term weakness. Now, let’s look at Sun Life’s TTM growth rates in revenue, earnings and cash flows:
- Revenue: 7.3%
- Earnings: -0.1%
- Operating cash flow: 27%
It is clear, based on these metrics, that Sun Life is a bit behind Manulife in the TTM period. But let’s pull back a little bit. The five-year compounded rates for Sun Life were these:
- Revenue: -3.56%
- Earnings: 3.6%
- Operating cash flow: N/A
Sun Life actually grew a bit over the last five years, while Manulife didn’t. So, it’s a mixed showing from these companies on growth.
Profitability
When it comes to profitability, Manulife generally does a little better than Sun Life. In the TTM period, its gross, net and free cash flow (FCF) margins were as follows:
- Gross margin: 52%
- Net margin: 19%
- FCF margin: 16%
Here are the same metrics for Sun Life:
- Gross margin: 40%
- Net margin: 9.45%
- FCF margin: -23%
Based on these metrics, Manulife looks a lot more profitable than Sun Life.
Valuation
Last but not least, we have valuation. This factor also appears to favour Manulife, although less decisively than the profitability factor. Manulife’s price-to-earnings (P/E), price-to-sales (P/S), and price-to-book (P/B) ratios using TTM financials are:
- P/E: 10.8
- P/S: 2.5
- P/B: 1.48
Here are the same for Sun Life:
- P/E: 12
- P/S: 1.47
- P/B: 2
Manulife wins on two out of the three most popular valuation multiples. So, it appears cheaper than Sun Life based on these metrics.
Income potential
Last but not least is income potential. Manulife Financial has a 4.2% yield, while Sun Life has a 4.16% yield. These are not meaningfully different, so I’ll call this one a draw.
Foolish takeaway
Taking into account the basic metrics I’ve looked at in this article, I’d be inclined to invest $10,000 into Manulife rather than Sun Life. It wins in head-to-head comparisons of profitability and valuation metrics, while the comparison of growth metrics is a toss-up. I should stress that this is not a complete financial analysis that looks into competitive positions and balance sheet strength — it’s just a review of the headline metrics. But if I had to pick just one of these two stocks today based on the metrics explored in this article, I would go with Manulife.
