Should We Avoid Manulife Financial (MFC) Because of Its Low Analyst Ratings?

Manulife Financial may be undervalued with poor growth indicators, but the 3 analysts following the company give it an rating of hold. Their target prices range from $18.52 to $21.48 per share, for an average of $20.24. At today's price of $18.88, Manulife Financial is trading -6.72% away from its average target price, suggesting there is an analyst consensus of some upside potential for the stock.

Manulife Financial Corporation, together with its subsidiaries, provides financial products and services in Asia, Canada, the United States, and internationally. Based in Toronto, Canada, the large-cap Finance company has 40,000 full time employees. Manulife Financial has not offered a dividend over the last year.

Manulife Financial has a trailing twelve month P/E ratio of 7.1, compared to an average of 14.34 for the Finance sector. Based on its EPS guidance of 2.65, the company has a forward P/E ratio of 7.1.

The average compound growth rate of the company's historical and projected earnings per share is -0.9%. On this basis, the company's PEG ratio is -8.04, which indicates that its shares are overpriced.

On the other hand, the market is potentially undervaluing Manulife Financial in terms of its book value because its P/B ratio is 0.67. In comparison, the sector average P/B ratio is 1.57. The company's shares are currently -56.5% below their Graham number, indicating that its shares have a margin of safety.

If analysts are willing to give the company a bad rating despite its potentially attractive valuation, its likely that they are concerned by Manulife Financial's lacking growth potential, as signaled by its -33.4% rate of revenue growth, and capital expenditures that are only growing at None% on average each year.

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $77,822 $77,121 $59,841 $15,284
Interest Income -$1,319,000 -$1,181,000 -$1,011,000 -$1,350,000
Net Margins 6.77% 6.91% 11.12% 47.0%
Net Income (MM) $5,269 $5,326 $6,657 $7,183
Depreciation & Amort. -$626,000 -$656,000 -$529,000 -$538,000
Earnings Per Share $2.77 $2.93 $3.54 $2.67
EPS Growth n/a 5.78% 20.82% -24.58%
Diluted Shares (MM) 1,962 1,943 1,946 1,850
Free Cash Flow (MM) $20,542 $20,048 $23,155 $17,735
Long Term Debt (MM) $11,663 $13,993 $11,862 $12,356
Net Debt / EBITDA -0.8 -1.46 -1.14 -0.64
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.