With interest rates poised to rise, financial companies may produce increasing profits. I have recently pointed to Power Corporation as a good value. Let’s compare the non-bank financial companies from the TSX60, then I’ll include the banks in a list from best value to most expensive. Please keep in mind that this is based on recent earnings and past financial numbers, not on speculation about future changes.

Power Corporation of Canada

Symbol: POW on the TSX. The price at yesterday’s close was $29.17, which is between the 52-week low of $26.77 and the 52-week high of $32.35 (fairly valued). (Chart.) The stock price has outperformed the TSX by 0.07% during the last year. The current yield is 4.53%, which is below the 10 year average of 4.90% (overvalued). The P/E ratio is 12.27, above the 10 year average of 10.26 (overvalued). The Price/Book ratio is 0.96, near the 10 year average of 0.97 (fairly valued). Market capitalization is $13,564.05M (large cap).

Although Power Corporation ranked high on my value list, it actually appears to be fairly valued. My fair value estimate is between $25-$30. It also looks like it has good growth in book value over the past three years. There is a potential for growth along with a very good current yield.

Sun Life Financial Inc

Symbol: SLF on the TSX. The price at yesterday’s close was $45.32, which is between the 52-week low of $40.28 and the 52-week high of $53.49 (fairly valued). (Chart.) The stock price has outperformed the TSX by 0.04% during the last year. The current yield is 3.57%, which is below the 10 year average of 4.93% (overvalued). The P/E ratio is 11.00, below the 10 year average of 13.10 (undervalued). The Price/Book ratio is 1.41, above the 10 year average of 1.06 (overvalued). Market capitalization is $28,053.08M (large cap).

Sun Life ranked just below Power Corporation. It isn’t a clear value, since my fair value estimate is $35-$40. But it still offers good current yield, it has shown some growth in book value, but there has also been a rising debt/equity ratio. It would probably be a decent investment, but is less attractive than Power Corporation.

Manulife Financial

Symbol: MFC on the TSX. The price at yesterday’s close was $23.99, which is near the 52-week high of $25.48 (overvalued). (Chart.) The stock price has underperformed the TSX by -0.25% during the last year. The current yield is 3.08%, which is below the 10 year average of 3.84% (overvalued). The P/E ratio is 16.55, below the 10 year average of 17.96 (undervalued). The Price/Book ratio is 1.20, above the 10 year average of 1.12 (overvalued). Market capitalization is $47,476.21M (large cap).

Manulife ranked below both Power Corporation and Sun Life. It has a lower yield, it appears more expensive and has a higher P/E ratio. My fair value estimate is between $20-$25, so it may actually be a better long-term investment than Sun Life.

Brookfield Asset Management Inc

This isn’t really a financial firm, but I’ve included it just for comparison. It contains real estate and alternative investments (I believe), so it’s categorized as financial and it’s a type of investment firm. It has a much lower yield and higher P/E ratio than the others.

Symbol: BAM.A on the TSX. The price at yesterday’s close was $50.65, which is near the 52-week high of $52.85 (overvalued). (Chart.) The stock price has underperformed the TSX by -0.11% during the last year.The current yield is 1.03%, which is below the 10 year average of 1.44% (overvalued). The P/E ratio is 32.99, above the 10 year average of 17.19 (overvalued). The Price/Book ratio is 1.65, near the 10 year average of 1.56 (fairly valued). Market capitalization is $49,282.45M (large cap).

Listing of companies in order of perceived (by me) value, including banks

I will note that financials and banks are among the best value in the TSX60, appearing cheaper than the consumer and resource stocks.

Power Corporation Of Canada, Sv (POW.to)
Canadian Imperial Bank Of Comme (CM.to)
Sun Life Financial Inc. (SLF.to)
National Bank Of Canada (NA.to)
Bank Of Montreal (BMO.to)
Bank Of Nova Scotia (BNS.to)
TD Bank (TD.to)
Royal Bank Of Canada (RY.to)
Manulife Financial (MFC.to)
Brookfield Asset Management Inc (BAM-A.to) (not value)

Financial Companies

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