Here's Why We Think Manulife Financial (TSE:MFC) Might Deserve ... - Yahoo Finance

It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Unfortunately, these high risk investments often have little probability of ever paying off, and many investors pay a price to learn their lesson. While a well funded company may sustain losses for years, it will need to generate a profit eventually, or else investors will move on and the company will wither away.

If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Manulife Financial (TSE:MFC). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Manulife Financial with the means to add long-term value to shareholders.

Check out our latest analysis for Manulife Financial

How Quickly Is Manulife Financial Increasing Earnings Per Share?

Generally, companies experiencing growth in earnings per share (EPS) should see similar trends in share price. Therefore, there are plenty of investors who like to buy shares in companies that are growing EPS. Recognition must be given to the that Manulife Financial has grown EPS by 53% per year, over the last three years. While that sort of growth rate isn't sustainable for long, it certainly catches the eye of prospective investors.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Not all of Manulife Financial's revenue last year was revenue from operations, so keep in mind the revenue and margin numbers used in this article might not be the best representation of the underlying business. Unfortunately, Manulife Financial's revenue dropped 55% last year, but the silver lining is that EBIT margins improved from 1.2% to 89%. That falls short of ideal.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Manulife Financial.

Are Manulife Financial Insiders Aligned With All Shareholders?

It's said that there's no smoke without fire. For investors, insider buying is often the smoke that indicates which stocks could set the market alight. Because often, the purchase of stock is a sign that the buyer views it as undervalued. However, insiders are sometimes wrong, and we don't know the exact thinking behind their acquisitions.

The CA$121k worth of shares that insiders sold during the last 12 months pales in comparison to the CA$3.0m they spent on acquiring shares in the company. This bodes well for Manulife Financial as it highlights the fact that those who are important to the company having a lot of faith in its future. We also note that it was the Independent Chairman of the Board, Donald Lindsay, who made the biggest single acquisition, paying CA$2.7m for shares at about CA$26.97 each.

Along with the insider buying, another encouraging sign for Manulife Financial is that insiders, as a group, have a considerable shareholding. To be specific, they have CA$39m worth of shares. This considerable investment should help drive long-term value in the business. Even though that's only about 0.09% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Does Manulife Financial Deserve A Spot On Your Watchlist?

Manulife Financial's earnings have taken off in quite an impressive fashion. What's more, insiders own a significant stake in the company and have been buying more shares. This quick rundown suggests that the business may be of good quality, and also at an inflection point, so maybe Manulife Financial deserves timely attention. What about risks? Every company has them, and we've spotted 1 warning sign for Manulife Financial you should know about.

Keen growth investors love to see insider buying. Thankfully, Manulife Financial isn't the only one. You can see a a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.