Does Sun Life Still Offer Long Term Value After Its Wealth and Health Expansion Push?

• If you are wondering whether Sun Life Financial is still a smart place to put fresh capital at today's price, you are not alone. That is exactly what this breakdown is here to unpack.
• After a modest 2.9% gain over the last week and 1.3% over the past month, the stock is roughly flat year to date at -0.8%, but still up 3.1% over 1 year, 53.8% over 3 years, and 87.6% over 5 years. This hints at a longer-term story that may not be fully reflected in short-term moves.
• Recent headlines have focused on Sun Life's ongoing expansion in wealth and asset management, its push into health benefits and digital distribution, and strategic partnerships that deepen its footprint in key Asian and North American markets. Together, these moves help explain why the market has been willing to re-rate the shares, even if the price action has been gradual rather than explosive.
• Right now, Sun Life scores a 2 out of 6 on our valuation checks. This suggests some pockets of value but also areas where the market may be pricing in a lot of the good news. In the next sections we will walk through the main valuation approaches we use, before finishing with a more holistic way to think about what the stock is really worth.

Sun Life Financial scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Sun Life Financial Excess Returns Analysis

The Excess Returns model looks at how much profit a company can generate above the return that shareholders reasonably demand on their capital, and then capitalizes those surplus profits into an intrinsic value per share.

For Sun Life Financial, the starting point is its Book Value of CA$42.01 per share and an Average Return on Equity of 18.34%. Analysts expect this to translate into Stable EPS of CA$8.44 per share, based on future return on equity estimates from 5 analysts. The implied Cost of Equity is CA$2.82 per share, so the company is projected to earn an Excess Return of CA$5.63 per share each year over the long run.

With Stable Book Value forecast to rise to CA$46.04 per share, based on estimates from 8 analysts, the model suggests Sun Life can keep compounding value at attractive rates. When those excess returns are extrapolated and discounted, the Excess Returns valuation points to an intrinsic value around CA$213.09 per share, implying the stock is about 60.5% undervalued versus its current price.

Result: UNDERVALUED

Our Excess Returns analysis suggests Sun Life Financial is undervalued by 60.5%. Track this in your watchlist or portfolio, or discover 911 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Sun Life Financial.

Approach 2: Sun Life Financial Price vs Earnings

For consistently profitable companies like Sun Life Financial, the price to earnings, or PE, ratio is a useful shorthand for how much investors are willing to pay for each dollar of current earnings. A higher PE typically reflects expectations of stronger growth or lower perceived risk, while a lower PE tends to signal slower growth prospects or higher uncertainty.

Sun Life currently trades on a PE of 15.7x, which is above the broader Insurance industry average of 11.8x and slightly above its peer group average of 15.1x. On the surface, that premium suggests the market is assigning Sun Life a higher quality or growth profile than many insurers.

Simply Wall St’s Fair Ratio framework goes a step further by estimating what a “normal” PE should be for this specific business, based on its earnings growth outlook, profit margins, risk factors, industry and market cap. For Sun Life, the Fair Ratio comes out at 14.6x, modestly below the current 15.7x, which implies the shares are trading a little ahead of where fundamentals alone might justify.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Sun Life Financial Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple tool on Simply Wall St’s Community page that lets you attach a clear story about Sun Life Financial to your assumptions for future revenue, earnings and margins. It automatically links that story to a financial forecast, a Fair Value, and a clear buy or sell view by comparing that Fair Value to today’s price, while updating dynamically as new news or earnings arrive. For example, one investor might build a bullish Sun Life Narrative that leans into accelerating Asian growth, margin gains from digital efficiency, steady dividend increases and a target near the high end of recent estimates around CA$95 per share. In contrast, a more cautious investor might focus on U.S. Dental headwinds, fee pressure at MFS, and regulatory or rate cut risks to justify a lower Fair Value closer to CA$74, both using the same framework but different perspectives to decide whether the current price offers enough upside.

Do you think there's more to the story for Sun Life Financial? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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