Stock Analysis

Does The Hype Around Great-West Lifeco Inc.'s (TSE:GWO) Growth Justify Its August Share Price?

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Growth expectations for Great-West Lifeco Inc. (TSE:GWO) are high, but many investors are starting to ask whether its last close at CA$28.18 can still be rationalized by the future potential. Let’s take a look at some key metrics to determine whether there's any value here for current and potential future investors.

See our latest analysis for Great-West Lifeco

Has the GWO train slowed down?

Analysts are predicting good growth prospects for Great-West Lifeco over the next couple of years. The consensus forecast from 9 analysts is buoyant with earnings per share estimated to rise from today's level of CA$2.577 to CA$3.388 over the next three years. This results in an annual growth rate of 12%, on average, which indicates a solid future in the near term.

Is GWO's share price justified by its earnings growth?

Great-West Lifeco is trading at quite low price-to-earnings (PE) ratio of 10.93x. This tells us the stock is undervalued relative to the current CA market average of 13.91x , and undervalued based on its latest annual earnings update compared to the Insurance average of 11.8x .

TSX:GWO Price Estimation Relative to Market, August 24th 2019
TSX:GWO Price Estimation Relative to Market, August 24th 2019

Given that GWO's price-to-earnings of 10.93x lies below the industry average, this already indicates that the company could be potentially undervalued. However, seeing as Great-West Lifeco is perceived as a high-growth stock, we must also account for its earnings growth, which is captured in the PEG ratio. A PE ratio of 10.93x and expected year-on-year earnings growth of 12% give Great-West Lifeco a low PEG ratio of 0.92x. This means that, when we account for Great-West Lifeco's growth, the stock can be viewed as fairly valued , based on the fundamentals.

What this means for you:

GWO's current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you're a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I urge you to complete your research by taking a look at the following:

  1. Financial Health: Are GWO’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has GWO been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of GWO's historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.