The AMP Ltd (ASX: AMP) share price has had a disastrous few years on the market. It's tumbled a whopping 76% over the last five years amid shocking findings from the Financial Services Royal Commission.
The AMP share price last closed at $1.19, leaving the company with a market capitalisation of around $3.7 billion.
Though, many a transformation has occurred at AMP recently. Could it be that its current valuation doesn't consider some of its major assets? Let's take a look.
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Does the AMP share price undervalue the company?
The AMP share price has caught the eye of one expert this month.
Speaking to my Fool colleague Bernd, Bennelong Kardinia Absolute Return Fund portfolio manager Kristiaan Rehder heralded the stock as a potential winner, saying:
It's been out of favour for some time … [but] our analysis shows that there's considerable excess capital. And we think it can surprise the market in regards to the extent of its capital returns in the near term.
Excess capital indeed. The company had $1.45 billion of surplus capital on its books at the end of the first half. It has already begun returning some of that to shareholders through an on-market share buyback.
It's also awaiting the finalisation of the sale of its Collimate Capital business – set to bring in around $700 million of upfront cash payments.
Thus, the company will likely soon boast more than $2 billion of surplus capital.
Its fund management platforms' cash outflows have also notably improved recently. AMP's North and New Zealand Wealth Management divisions each saw net cash inflows in the September quarter, while its Australian Wealth Management segment's outflows markedly improved.
Finally, AMP Bank recorded growth of 1.4 times above system last quarter. And the company's CEO Alexis George is hopeful of its future, saying:
We've seen a reduction in cash outflows to other superannuation funds and we're winning new customers on our North platform.
[W]e have already launched our digital mortgage and unique-to-market retirement offer. These are important strategic deliverables that will support AMP's longer-term growth.
But could the AMP share price really undervalue the company?
Well, the ASX 200 stock boasted $4.6 billion of equity and reserves attributable to shareholders at the end of June.
That's around $900 million more than AMP's valuation at its share price's previous close and leaves the stock with a price-to-book (P/B) ratio of around 0.8. That's relatively undervalued, if you ask me.
