Great-West Lifeco (TSX:GWO) - Share price, News & Analysis

Q: What is the Fair Price of GWO when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

GWO (CA$31.43) is trading below our estimate of [[fair value]] (CA$92.13)

GWO fundamental analysis
Snowflake Score
Valuation	3/6
Future Growth	3/6
Past Performance	2/6
Financial Health	4/6
Dividends	6/6

GWO Stock Overview

Rewards

Trading at 65.9% below our estimate of its fair value

Earnings are forecast to grow 5.9% per year

Pays a high and reliable dividend of 6.24%

Risk Analysis

GWO passed our risk checks.

Great-West Lifeco Competitors

Power Corporation of Canada

TSX:POW

CA$23.1b

Sun Life Financial

TSX:SLF

CA$34.6b

Manulife Financial

TSX:MFC

CA$42.5b

iA Financial

TSX:IAG

CA$6.6b

Price History & Performance

Summary of all time highs, changes and price drops for Great-West Lifeco
Historical stock prices
Current Share Price	CA$31.43
52 Week High	CA$41.50
52 Week Low	CA$30.39
Beta	0.80
1 Month Change	-8.82%
3 Month Change	-14.66%
1 Year Change	-14.13%
3 Year Change	3.70%
5 Year Change	-10.66%
Change since IPO	1,447.32%

Shareholder Returns

	GWO	CA Insurance	CA Market
7D	-0.4%	1.0%	0.1%
1Y	-14.1%	-6.3%	-2.6%

Return vs Industry: GWO underperformed the Canadian Insurance industry which returned -6.3% over the past year.

Return vs Market: GWO underperformed the Canadian Market which returned -2.6% over the past year.

Price Volatility

Is GWO's price volatile compared to industry and market?
GWO volatility
GWO Average Weekly Movement	3.0%
Insurance Industry Average Movement	4.0%
Market Average Movement	10.0%
10% most volatile stocks in CA Market	17.3%
10% least volatile stocks in CA Market	4.4%

Stable Share Price: GWO is less volatile than 75% of Canadian stocks over the past 3 months, typically moving +/- 3% a week.

Volatility Over Time: GWO's weekly volatility (3%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1891	28,000	Paul Mahon	https://www.greatwestlifeco.com

Great-West Lifeco Inc., a financial services holding company, engages in the life and health insurance, retirement and investment services, asset management, and reinsurance businesses in Canada, the United States, and Europe. The company offers a portfolio of financial and benefit plan solutions for individuals, families, businesses, and organizations; life, disability, critical illness, accidental death, dismemberment, health and dental protection, and creditor insurance products; and retirement savings and income, annuity, and other specialty products. It also provides employer-sponsored retirement savings plans, individual retirement and taxable brokerage accounts, enrollment services, communication materials, investment options, and education services; and fund management, investment, and advisory services.

Great-West Lifeco Fundamentals Summary

How do Great-West Lifeco's earnings and revenue compare to its market cap?
GWO fundamental statistics
Market Cap	CA$29.17b
Earnings (TTM)	CA$3.19b
Revenue (TTM)	CA$61.95b

9.2x

P/E Ratio

0.5x

P/S Ratio

Is GWO overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
GWO income statement (TTM)
Revenue	CA$61.95b
Cost of Revenue	CA$50.97b
Gross Profit	CA$10.98b
Other Expenses	CA$7.79b
Earnings	CA$3.19b

Last Reported Earnings

Mar 31, 2022

Next Earnings Date

Aug 03, 2022

Earnings per share (EPS)	3.42
Gross Margin	17.72%
Net Profit Margin	5.15%
Debt/Equity Ratio	31.8%

How did GWO perform over the long term?

See historical performance and comparison

Dividends

6.2%

Current Dividend Yield

54%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is GWO undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

3/6

Valuation Score 3/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for GWO?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for GWO. This is calculated by dividing GWO's market cap by their current preferred multiple.
What is GWO's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	CA$29.17b

GWO key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	0.6x
Enterprise Value/EBITDA	8.5x
PEG Ratio	1.6x

Price to Earnings Ratio vs Peers

How does GWO's PE Ratio compare to its peers?

GWO PE Ratio vs Peers

The above table shows the PE ratio for GWO vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	7.5x
POW Power Corporation of Canada	8x	6.5%	CA$23.1b
SLF Sun Life Financial	9x	7.1%	CA$34.6b
MFC Manulife Financial	4.8x	-12.1%	CA$42.5b
IAG iA Financial	8.3x	11.7%	CA$6.6b
GWO Great-West Lifeco	9.2x	5.9%	CA$29.2b

Forward PE

Price-To-Earnings vs Peers: GWO is expensive based on its Price-To-Earnings Ratio (9.2x) compared to the peer average (7.5x).

Price to Earnings Ratio vs Industry

How does GWO's PE Ratio compare vs other companies in the North American Insurance Industry?

Price-To-Earnings vs Industry: GWO is expensive based on its Price-To-Earnings Ratio (9.2x) compared to the Canadian Insurance industry average (8x)

Price to Earnings Ratio vs Fair Ratio

What is GWO's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

GWO PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	9.2x
Fair PE Ratio	10.5x

Price-To-Earnings vs Fair Ratio: GWO is good value based on its Price-To-Earnings Ratio (9.2x) compared to the estimated Fair Price-To-Earnings Ratio (10.5x).

Share Price vs Fair Value

What is the Fair Price of GWO when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: GWO (CA$31.43) is trading below our estimate of fair value (CA$92.13)

Significantly Below Fair Value: GWO is trading below fair value by more than 20%.

Price to Earnings Growth Ratio

PEG Ratio: GWO is poor value based on its PEG Ratio (1.6x)

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Future Growth

How is Great-West Lifeco forecast to perform in the next 1 to 3 years based on estimates from 7 analysts?

Future Growth Score

3/6

Future Growth Score 3/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

5.9%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: GWO's forecast earnings growth (5.9% per year) is above the savings rate (1.6%).

Earnings vs Market: GWO's earnings (5.9% per year) are forecast to grow slower than the Canadian market (7.5% per year).

High Growth Earnings: GWO's earnings are forecast to grow, but not significantly.

Revenue vs Market: GWO's revenue (56.7% per year) is forecast to grow faster than the Canadian market (7% per year).

High Growth Revenue: GWO's revenue (56.7% per year) is forecast to grow faster than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: Insufficient data to determine if GWO's Return on Equity is forecast to be high in 3 years time

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Past Performance

How has Great-West Lifeco performed over the past 5 years?

Past Performance Score

2/6

Past Performance Score 2/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

5.8%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: GWO has high quality earnings.

Growing Profit Margin: GWO's current net profit margins (5.2%) are lower than last year (5.4%).

Past Earnings Growth Analysis

Earnings Trend: GWO's earnings have grown by 5.8% per year over the past 5 years.

Accelerating Growth: GWO's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: GWO had negative earnings growth (-3.5%) over the past year, making it difficult to compare to the Insurance industry average (30.7%).

Return on Equity

High ROE: GWO's Return on Equity (11.9%) is considered low.

Discover strong past performing companies

Financial Health

How is Great-West Lifeco's financial position?

Financial Health Score

4/6

Financial Health Score 4/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: GWO's short term assets (CA$144.8B) exceed its short term liabilities (CA$5.7B).

Long Term Liabilities: GWO's short term assets (CA$144.8B) do not cover its long term liabilities (CA$564.4B).

Debt to Equity History and Analysis

Debt Level: GWO has more cash than its total debt.

Reducing Debt: GWO's debt to equity ratio has increased from 23% to 31.8% over the past 5 years.

Debt Coverage: GWO's debt is well covered by operating cash flow (103.3%).

Interest Coverage: GWO's interest payments on its debt are well covered by EBIT (11.5x coverage).

Balance Sheet

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Dividend

What is Great-West Lifeco current dividend yield, its reliability and sustainability?

Dividend Score

6/6

Dividend Score 6/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

6.24%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: GWO's dividend (6.24%) is higher than the bottom 25% of dividend payers in the Canadian market (1.99%).

High Dividend: GWO's dividend (6.24%) is in the top 25% of dividend payers in the Canadian market (5.27%)

Stability and Growth of Payments

Stable Dividend: GWO's dividends per share have been stable in the past 10 years.

Growing Dividend: GWO's dividend payments have increased over the past 10 years.

Earnings Payout to Shareholders

Earnings Coverage: With its reasonable payout ratio (54.1%), GWO's dividend payments are covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its low cash payout ratio (18.3%), GWO's dividend payments are well covered by cash flows.

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Management

How experienced are the management team and are they aligned to shareholders interests?

4.8yrs

Average management tenure

CEO

Paul Mahon (57 yo)

9.08yrs

Tenure

CA$9,092,151

Compensation

Mr. Paul Anthony Mahon had been the Chief Executive Officer and President of London Life Insurance Company, Canada Life Financial Corporation, Great-West Lifeco Inc. and Canada Life Limited since May 3, 20...

CEO Compensation Analysis

Compensation vs Market: Paul's total compensation ($USD7.05M) is about average for companies of similar size in the Canadian market ($USD8.43M).

Compensation vs Earnings: Paul's compensation has been consistent with company performance over the past year.

Leadership Team

Experienced Management: GWO's management team is considered experienced (4.8 years average tenure).

Board Members

Experienced Board: GWO's board of directors are considered experienced (9.5 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: GWO insiders have bought more shares than they have sold in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/06/28 00:00
End of Day Share Price	2022/06/28 00:00
Earnings	2022/03/31
Annual Earnings	2021/12/31