Suncorp shares up again

After reporting very solid gains yesterday, Suncorp (ASX: SUN) has again opened in positive territory.

Investors are falling in love with Suncorp’s debt-free balance sheets and driving the share price higher every day. It’s up over 50% for the year and around 4.5% for the week.

The last year has been very well played out, and Suncorp has managed to rid itself of bad bank debt and go through a year without any major weather events.

Morningstar predicts that the company’s earnings per share will increase from 55.7 cents to 96.1 cents in 2014. This would represent a significant drop in the earnings ratios and would no doubt push its share price higher.

However, the market may believe that the gains carried forward from the first half to 31 December 2012 will be reflected in the second half. When we buy a stock we are essentially paying for a multiple of the company’s profits. In its first half Suncorp recorded a $574 million profit but in the second, it will sustain the losses of its debt sale to Goldman Sachs, which resulted in an approximate $490 million loss.

Foolish takeaway

Suncorp is a great long-term stock and investors should be looking at its potential for gains in a 5- or 10-year scope. Leave the short term to the traders and punters and remember to buy in when the company experiences some volatility so long as it’s just “noise” rather than any company specific news.

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Motley Fool contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

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