When Manulife Financial Corporation (TSX:MFC) released its most recent earnings update (31 December 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Manulife Financial performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see MFC has performed.
Could MFC beat the long-term trend and outperform its industry?
MFC's trailing twelve-month earnings (from 31 December 2019) of CA$5.4b has jumped 17% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 13%, indicating the rate at which MFC is growing has accelerated. What's the driver of this growth? Well, let’s take a look at whether it is merely due to industry tailwinds, or if Manulife Financial has seen some company-specific growth.
In terms of returns from investment, Manulife Financial has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 0.8% is below the CA Insurance industry of 1.0%, indicating Manulife Financial's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Manulife Financial’s debt level, has increased over the past 3 years from 0.6% to 1.0%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 57% to 40% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Manulife Financial has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research Manulife Financial to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MFC’s future growth? Take a look at our free research report of analyst consensus for MFC’s outlook.
- Financial Health: Are MFC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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