Power Corporation of Canada (TSX:POW), affectionately nicknamed Power Corp, is a Canadian financial sector giant celebrating its 100th birthday this year. That’s a century of navigating markets, building businesses, and rewarding shareholders. But with its stock up 19% year to date and delivering a stellar 195% total return over the past five years, a crucial question arises: Is there still juice left in the tank for investors buying the value stock today? Let’s dig in.
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The elephant in the room: The conglomerate discount
Power Corp isn’t a single company — it’s a holding entity with stakes in financial heavyweights like Great-West Lifeco (insurance), IGM Financial (wealth management), and alternative-asset managers Sagard and Power Sustainable. This structure triggers what’s known as a conglomerate discount: the market prices Power Corp stock below the sum of its subsidiaries’ standalone values. Why? Investors often penalize complexity, assuming holding companies add overhead or lack strategic focus. Historically, this discount hovered near 20%. But here’s the opportunity: it’s narrowing. As of mid-June, shares traded around $52.39 — a 17.6% discount to their most recent net asset value (NAV) reported for May 13, 2025. Management is hell-bent on closing the valuation gap.
How management is fighting the discount (and winning)
Power Corp’s CEO Jeffrey Orr and CFO Jake Lawrence aren’t crossing their fingers and hoping for the best. They’re on the offensive with two shareholder-friendly tactics:
- Relentless share buybacks: Power Corp repurchased three million shares during the first quarter alone, boosting per-share NAV and effectively buying dollar bills for 80 cents. With over $1 billion in readily deployable cash resources, management has vowed to keep up the pace, even if it means dipping below their $850 million comfort buffer.
- POW stock’s dividend dynamite: Power Corp’s quarterly dividend recently jumped 9% year over year to $0.6125 per share. The payout yields a juicy 4.7% annually, and it’s fueled by Great-West Lifeco, Power Corp’s cash cow, contributing 89.3% of earnings, which has hiked its dividend every year for more than a decade.
The earnings and cash flow engines beneath the hood
Share buybacks and generous dividends only work if the underlying businesses hum. And boy, do they:
- Great-West Lifeco recently cleared $1 billion in earnings for the fourth straight quarter, lifted retirement and wealth units by double digits, and now targets a 19% return on equity (ROE).
- IGM Financial recently notched record earnings, with its strategic bets, like digital darling Wealthsimple (assets up 87% year over year), blossoming into future profit engines.
- Alternative investment platforms Sagard and Power Sustainable are scaling smartly. Sagard snapped up secondary private-equity specialist BEX Capital, while Power Sustainable launched a fourth fund targeting decarbonization, a megatrend institutional investors adore.
Power Corp stock’s valuation growth catalysts
Beyond steady execution, three sparks could ignite a further conglomerate discount compression on Power Corporation of Canada stock: a sustained capital return momentum, alternative investments portfolios growth and increased fee-related earnings could make POW stock easier to value, and synergistic benefits as Great-West’s U.S. division, Empower, partners with Sagard for alternative investments.
Valuation: Power Corp stock’s margin of safety
Power Corporation stock trades at a forward price-to-earnings (P/E) ratio of 9.4 and a P/E-to-growth (PEG) ratio near 1.1 — suggesting it’s fairly priced on earnings alone. But the 17.6% NAV discount? That’s your upside runway. Great-West (8-10% earnings growth and about 5% dividend yield) and IGM (9% earnings growth plus a 5% dividend yield) could help deliver about 14% annual returns before stock repurchases or a narrowing conglomerate discount. Add share buybacks at discounted prices, and double-digit total returns look achievable on POW stock over the next three to five years.
Investor takeaway
Power Corp isn’t a flashy tech stock; it’s a century-old cash compounder with a plan. Buying POW stock today means snagging Great-West and IGM at a discount, plus getting growth rockets like Wealthsimple and Sagard for free. Risks? Sure. An economic slump could delay discount narrowing. But with a strong balance sheet and strong free cash flow position, Power Corp can weather storms.
For patient investors, this is a chance to own a diversified financial powerhouse actively fighting to unlock value. The discount window may narrow further, and today’s buyers might just celebrate Power Corp’s next 100 years with fatter portfolios.
