Can the Suncorp Group Ltd share price climb higher?

Much to the delight of its shareholders, the Suncorp Group Ltd (ASX: SUN) share price has been amongst the best performers in the insurance industry this year.

At present its shares are up 7% year-to-date, stretching its 12-month return to an impressive 16%.

Is it still a buy?

This gain means that Suncorp’s shares are changing hands at a little under 17x trailing earnings.

Whilst this is significantly cheaper than rival Insurance Australia Group Ltd (ASX: IAG) which trades at 24x trailing earnings, it is close to the average earnings multiple its shares have traded at over the last five years.

With that in mind, I would say that Suncorp’s shares are about fair value now and offer limited upside potential in the near-term.

But that doesn’t necessarily mean I think investors should sell the insurance giant’s shares today. With a trailing fully franked 4.9% dividend, I would hold tight to its shares for the long-term.

Especially with its new operating model showing signs of promise early on. The One Suncorp strategy has played a key role in the company’s improved underlying insurance trading ratio (ITR) this year.

Suncorp’s ITR rose from 10.1% to 11% during the first-half of FY 2017. Pleasingly, management believes it is on course to reach 12% in the near future.

As the ITR increases, so too does Suncorp’s profitability. If it can reach 12% then this should allow the company to grow its earnings and dividend at a solid rate.

Overall, whilst it isn’t the bargain buy it was 12 months ago, I would still class the insurer’s shares as a hold today.

Whilst Suncorp may be a hold in my eyes, this dirt cheap dividend share with a huge yield could be a buy today.

Especially with its strong growth prospects thanks to its international expansion.

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of Insurance Australia Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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