Power Corporation of Canada (TSX:POW), a holding company with stakes in financial services and alternative asset management, has generated more than 240% in total returns over the past five years. However, the conglomerate’s stock still trades at a steep 26.8% discount to net asset value (NAV) today. But with a clear strategy to grow its core subsidiaries, return capital to shareholders, and expand its alternative investment platforms, POW stock could deliver compelling returns over the next five years.
Here’s what investors need to know about this value stock’s potential to outperform the market over the next half decade.
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NAV growth: The engine of Power Corporation stock’s value creation
Net asset value represents the intrinsic value of an asset. Power Corporation’s NAV per share surged 14% during the first quarter of 2025 (Q1 2025) to $68.99, driven by strong performances at subsidiaries Great-West Lifeco and IGM Financial. These two companies account for about 84% of Power Corporation’s gross asset value and are poised to sustain mid-single-digit to double-digit earnings growth.
Strong earnings growth at subsidiaries should drive respectable increases in POW stock’s value over the next five years:
- Great-West Lifeco targets 8% to 10% annual base earnings per share (EPS) growth through its dominant retirement and wealth management businesses, supported by a raised medium-term return on equity (ROE) target of 19%.
- IGM Financial aims for 9% adjusted EPS growth, fueled by record assets under management ($275 billion in Q1 2025) and strategic fintech investments like Wealthsimple.
Assuming a conservative 7–9% annual NAV growth (below recent rates), Power Corporation’s NAV could reach the $97 to $106 per share range by 2030.
Narrowing the conglomerate discount
Power Corporation’s shares currently trade at a 20–25% discount to NAV, a persistent valuation gap common for conglomerates. However, management is actively addressing this through share repurchases, business simplification, and enhanced market communications.
Management has repurchased about 5% of Power Corporation’s outstanding shares since the end of 2021, boosting per share metrics like earnings per share. The financial sector giant is also simplifying its empire by exiting non-core assets and focusing on high growth subsidiaries.
Most noteworthy, Power Corporation has improved its investor communications and is highlighting its subsidiary milestones to attract institutional investors, while disclosing NAV progress at every opportunity. Management estimated a NAV of $63.60 per share by May 13, 2025.
If the conglomerate discount narrows to, say, 15% to get closer to what peers like Brookfield Corporation sometimes achieve, shares could trade in the $82 to $90 range by 2030, implying a strong 60–78% upside over the next five years.
Dividends: A growing income stream
Power Corporation has resorted to dividend raises to further support shareholder returns. It raised its dividend by 9% for 2025, yielding 4.8% annually today. With subsidiaries like Great-West and IGM generating stable cash flows and increasing dividends, annual dividend growth rates of 5% to 7% are achievable during the next five years.
By 2030, dividends could compound to $3.50 or $4 per share, providing a juicy yield (on today’s cost) of 7% to 8% for today’s buyers of POW stock.
Alternative platforms: Sagard and Power Sustainable powering growth
Power Corporation’s substantial investments in private equity and venture capital subsidiary Sagard and alternative asset manager Power Sustainable should accelerate growth, especially as institutional investors look beyond traditional stocks and bonds to further diversify investments and unlock higher risk-adjusted returns. Successful scaling here would add incremental NAV upside over the next five years.
Risks to consider
While the potential for strong capital gains and juicy total returns on Power Corporation stock appears substantial over the next five years, some risks remain.
Market volatility is a significant risk to consider because Great-West and IGM are exposed to equity market swings. The two investments contribute a majority of the company’s revenue, earnings, and net asset value.
Further, execution risks, though dampened by expansive market experience, deserve mentioning. Great-West, IGM and other subsidiaries may miss targets, alternative asset portfolios may underperform, and there could be delays in narrowing the conglomerate discount.
Macro headwinds could throw the sails either way as rising interest rates or recessionary pressures.
Investor takeaway
Power Corporation stock has the potential to generate a 12% to 15% annual return over the next five years through capital gains and juicy dividend yields, and outperform the S&P/TSX Composite Financials (Sector) Index. Net asset value growth and a narrowing conglomerate discount may lift shares higher, while rising dividends provide growing streams of inflation-resilient passive income. For long-term-oriented investors, Power Corporation stock offers a compelling mix of value, income, and growth – all while trading at a deep discount to its intrinsic worth.
