Here's why Suncorp Group Ltd looks too cheap to ignore

The insurer and banker's forecast double-digit earningS growth may make today's price look low in the future.

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Looking into the future is always problematic. Something that appears expensive at present could become quite the opposite over time.

For example, back in 1973, could you guess what the median price for a detached house and land in Sydney was? Sit down first…

$27,400!

That wouldn't even pass for a deposit on a house these days since the median Sydney price is now a stunning $680,000!

Of course, at that time, the average NSW male earned about $111 a week, or $5,772 annually. That $27,400 price tag would have seemed high because it was close to five times a buyer's annual wages.

Early investors who held property this long would be sitting on veritable gold mines.

Long-term investing in stocks can do the same thing as well. Going from $27,400 to $680,000 is actually just a compounded 8.15% annual gain over 41 years. That's a return that you could achieve with a high dividend yield and average share price gain.

What stocks have good earnings prospects that you can build your future wealth on?

Suncorp Group Ltd (ASX: SUN) is looking cheap on valuations compared to the potential growth it has to offer.

The general insurance company and bank is forecast by analysts to have double-digit growth over the next two years as it restructures its business. It is streamlining its various insurance businesses and cutting costs by consolidating the products it offers. Also, it is replacing legacy computer systems with up-to-date, efficient ones which include cloud computing. That will make it a leaner company with better earnings power.

The annual cost savings are expected to be about $225 million in 2015 and up to $265 million by 2016. Being more price competitive will also help the company defend its market share against new market entrants like online-only insurance businesses.

The 22 price-earnings ratio may look high when compared to its peers like Insurance Australia Group Ltd (ASX: IAG) with a 12 PE. However, the company's PEG, or price-earnings to growth ratio is only 0.54, indicating good value for the expected growth.

The stock is paying a 5.7% yield fully franked, so together with the strong earnings outlook, the insurer and fifth largest banker in Australia appears to be good value for money. It has a good track record for raising its dividends, so there could be more portfolio income to look forward to.

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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