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2024 has not been kind to Prudential (LSE:PRU) stock price. At 666.8p per share, the life insurance giant is one of the companies FTSE 100The stock has been the worst performer for the year so far, down 25%.
That sinking feeling at 'The Pru' just hasn't happened yet. In fact, it has halved in value since the start of 2023 as worries about the Asian economies – and especially the important market of China – are slowly building.
I can't help but think the bad news is now more than baked into Prudential's low rating. It now trades at a price-to-earnings ratio (P/E) of 9.2 times, below the FTSE 100 average of 10.8 times.
In fact, given how stable trading is for emerging market companies, I believe the market is overbought. That's why I think it could be one of the best Footsie buys right now.
Another solid review
In last week's half-year statement, Prudential said new business profit remained steady at $1.47bn for the period. This was down 1% at real exchange rates, but given broader economic conditions it still represents an excellent performance.
Encouragingly, it added “we saw an increase in sales momentum in June [that’s continued] in the second half of the year“.
This is not the first confirmation update released in recent months. Indeed, adjusted operating profit at the company rose a healthy 6% between January and June, to $1.5bn.
In other good news, Prudential said its free surplus ratio has strengthened 232% since June. Down 10 percentage points from the same point in 2023, this remained above the target range of 175-200%.
Accordingly, Prudential increased interim dividends by 9% to 6.86 US cents per share.
Very good value
As I mentioned earlier, Prudential shares trade at a discount to the broader FTSE 100. But it doesn't end there. As the table below shows, its forward P/E ratio of 9.2 times is also the lowest in its peer group (bar MetLife).
| Company | The P/E ratio |
|---|---|
| Aviva | 10.9 times |
| Legal & General | 10.5 times |
| Zurich Insurance | 14.2 times |
| Allianz | 11.2 times |
| AXA | 9.7 times |
| MetLife | 8.8 times |
| Manulife | 13.3 times |
It could be argued that The Pru's exposure to volatile emerging markets merits such a discount. There may be some truth to that, but I'm not sure.
In fact, I believe that its geographic location may give it better investment potential than its industry rivals. In particular, it has a great opportunity to take advantage of the rapid population growth and increase personal income in its remote areas.
Indeed, the demand for life insurance in Asia is growing at a rapid pace, according to research from Allianz. Regional premium growth is expected to reach 14.9% in 2023, the company said, much higher than the long-term average of 5.2%.
In this climate, Prudential said it expects to deliver “new business revenue compound annual growth rate of 15% to 20% and double digit revenue generation“.
With the business still growing in Asia and investing heavily in the digital side, I wouldn't bet against it.
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