ASX Financial Industry: A Deep Dive Into AMP Limited (ASX:AMP)
AMP Limited (ASX:AMP), a A$15.13B large-cap, operates in the financial services industry, which tends to draw the more conservative investors who attracted by their steady revenue and the above-average dividend yields. Financial services analysts are forecasting for the entire industry, a somewhat weaker growth of 3.47% in the upcoming year , and a whopping growth of 49.52% over the next couple of years. This rate is larger than the growth rate of the Australian stock market as a whole. Below, I will examine the sector growth prospects, as well as evaluate whether AMP is lagging or leading in the industry. See our latest analysis for AMP
What’s the catalyst for AMP’s sector growth?
Recently, government and overseas regulators involvement has increased to play a prominent role, closely examining and controlling day-to-day business administration of certain companies. In the past year, the industry delivered negative growth of -8.70%, underperforming the Australian market growth of 6.93%. AMP lags the pack with its earnings falling by more than half over the past year, which indicates the company will be growing at a slower pace than its diversified financial services peers. As the company trails the rest of the industry in terms of growth, AMP may also be a cheaper stock relative to its peers.
Is AMP and the sector relatively cheap?
The financial services sector’s PE is currently hovering around 26.6x, above the broader Australian stock market PE of 17.8x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a lower 8.51% compared to the market’s 11.87%, which may be indicative of past headwinds. Since AMP’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge AMP’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:
AMP has been a financial services industry laggard in the past year. If AMP has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although it delivered lower growth relative to its financial peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. However, before you make a decision on the stock, I suggest you look at AMP’s fundamentals in order to build a holistic investment thesis.
1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Historical Track Record: What has AMP’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of AMP? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
