3 reasons of hope for AMP Limited

The recent good run could continue.

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The share price of insurer and financial services provider AMP Limited (ASX: AMP) is up 26% over the past year which is miles ahead of the return from both the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO), which has gained around 14% and also its peer Suncorp Group Ltd (ASX: SUN) which increased by 16%.

Of course recent outperformance aside, the long-term return from owning AMP has been shocking and concerning for shareholders. The question now for investors to ponder is whether the good times could continue for AMP or if the recent share price spike should be viewed as an opportunity to sell. It's a tricky question given the historic poor performance of the group, however there are reasons to be positive about the future outlook.

Scale Advantage

AMP's acquisition of AXA Asia Pacific has created a company with enormous scale in insurance, funds management and financial advice. With the combined tailwinds of a growing population, rising average incomes and an increasing superannuation pool, AMP is well positioned to prosper.

Asian Expansion

AMP's move into funds management in China via a strategic joint venture (JV) looks very clever and has already gained early traction. While there is plenty of scope for this JV to grow in its own right, it may also act as a springboard for the group to expand its operations in both China specifically, and Asia in general.

Valuation

Operating on a December year end, AMP is forecast (according to consensus data supplied by Morningstar) to earn 33.2 cents per share (cps) this year; the company is also forecast to payout dividends totalling 25.1 cps. Assuming these forecasts are met, this equates to a price-to-earnings ratio and yield of 16.2x and 4.6% respectively.

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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