Asset manager and general financial services provider AMP Limited (ASX: AMP) has traded flat over the past year in alignment with financial markets, although for investors the real question to consider is the prospects for the group's share price ahead.
According to Thomson Reuters consensus estimates of analysts are for forecast earnings per share of 41.2 cents for 2016 with dividends per share of 28.5 cents.
The group reports on a calendar year basis and in the most recent six months ending June 30 2015 reported an underlying net profit of $570 million, compared to $510 million for the prior corresponding period (pcp).
The dividend was 14 cents per share, with a cost to income ratio of 43.1 per cent, 1.9 per cent lower on the pcp.
Selling for $5.82 the stock is on around 15x forecast earnings of 38.5 cents per share for the current calendar year, which appears reasonable value given the modest growth outlook.
The company's asset management business has a reasonable outlook based on the growing superannuation pool, a strong brand, strong distribution networks and plenty of opportunity to find further cost efficiencies.
Although for investors the company's Achilles Heel has long been its wealth protection and general insurance operations focused in the life insurance and income protection space.
Both of these are big contributors to the group's financials, although as most recently as the quarter ending September 2015 the group has flagged problems with claims experience losses for the income protection book.
Growing sales of these kinds of general insurance products to Australians has proven problematic, or at least not the gravy train it was once considered to be, while it's also a competitive space with many financial services companies looking to bundle these types of products.
Overall, AMP looks to be around fair value, although its multiple moving parts, large cost base, and the distinctly average outlook for its insurance operations mean there are probably better financial services businesses available to buy today.
I would look to Challenger Ltd (ASX: CGF), or Magellan Financial Group Ltd (ASX: MFG) as better managed, more efficient operators likely to deliver superior long-term returns.
