Why Power Corporation? When you look at Power Corporation’s second-quarter results, there’s definitely nothing to write home about. Operating earnings were $306 million–$117 million or 28% less than in the same quarter a year earlier on $13.9 billion in revenue. However, it’s the long-term value creation that continues to make it a wonderful stock to own.
Five years ago Power Corporation stock was trading at $22 per share. Today, it trades around $27–a 23% increase in value. That’s not much. However, its operating earnings per share, book value per share, and total assets increased by 63%, 50%, and 71%, respectively. The book value number is the most interesting because in five short years it’s gone from a price-to-book ratio of 1.17 down to 0.9.
That, to a certain extent, is a lack of faith by investors in both Investors Group and Mackenzie Investments’s ability to overcome the move away from mutual funds to ETFs. In my opinion, Power Financial Corporation (TSX:PWF), Power Corporation’s sister company, is doing what it needs to do to remain relevant, including introducing a group of active ETFs.
Over the past five years, Power Corporation stock has traded under $27 on just two occasions, above $30 on three occasions, and only once in the past 10 years (2008) below $20. If it ever goes below $20, I’ll absolutely be buying it. At $27, however, it’s still a good deal, especially with a 4.9% yield.