SLF Rallies 18% YTD, Trades at Premium: Should You Buy the Stock?

Core Viewpoint - Sun Life Financial Inc. (SLF) is trading at a premium compared to the Zacks Life Insurance industry, with a forward price to earnings ratio of 10.07X, higher than the industry average of 7.37X, but lower than the Finance sector's 16.74X and the Zacks S&P 500 Composite's 22.52X [1] Group 1: Financial Performance - SLF's shares have gained 17.9% over the past year, outperforming the industry's growth of 11.2%, but underperforming the Finance sector and the Zacks S&P 500 Composite, which grew by 20.4% and 20.3% respectively [3] - The market capitalization of SLF is $31.8 billion, with an average trading volume of 0.7 million shares over the last three months [2] Group 2: Growth Projections - The Zacks Consensus Estimate for SLF's 2025 earnings per share indicates a year-over-year increase of 9.9%, with revenues projected at $30.5 billion, reflecting a 31.1% year-over-year improvement [6] - For 2026, the consensus estimates suggest an increase of 8.3% in earnings per share and 0.9% in revenues compared to 2025 [6] Group 3: Analyst Sentiment - Five out of six analysts covering SLF have raised their earnings estimates for 2025 and 2026 in the past 30 days, with the consensus estimate for 2025 earnings increasing by 1.3% and for 2026 by 1.8% [9] Group 4: Strategic Initiatives - SLF has made over 10 acquisitions, enhancing its U.S. health and group benefits through DentaQuest and expanding its Asian presence via the IPO of its India joint venture and growth in Vietnam and Indonesia [8][13] - The company is also investing in private fixed income, mortgages, and real estate, which strengthens its Asset Management division [15] Group 5: Return Metrics - SLF's return on equity (ROE) for the trailing 12 months is 17.1%, surpassing the industry average of 14.8%, indicating efficient utilization of shareholders' funds [12] - The return on invested capital (ROIC) for SLF is 0.7%, also better than the industry average of 0.6% [12] Group 6: Cost Considerations - Sun Life's expenses have increased due to higher employee costs, service fees, and amortization of intangible assets, which could pressure profitability despite hedging strategies aimed at limiting earnings volatility [16][17]