SLF Rallies 18% YTD, Trades at Premium: Should You Buy the Stock?

Sun Life Financial Inc. SLFshares are trading at a premium compared to the Zacks Life Insurance industry. Its forward price to forward 12-month earnings of 10.07X is higher than the industry average of 7.37X, while lower than the Finance sector’s 16.74X and the Zacks S&P 500 Composite’s 22.52X. The multi-line insurer has a Value Score of B.

Shares of other life insurers, such as Manulife Financial Corp MFC andReinsurance Group of America, Incorporated RGA, are also trading at a multiple higher than the industry average, while Jackson Financial Inc. JXNis trading at a discount.

The insurer has a market capitalization of $31.8 billion. The average volume of shares traded in the last three months was 0.7 million.

SLF’s Price Performance

Shares of Sun Life have gained 17.9% in the past year, outperforming the industry’s growth of 11.2%, while underperforming the Finance sector and the Zacks S&P 500 Composite’s growth of 20.4% and 20.3%, respectively.

SLF vs Industry, Sector & S&P 500 YTD

SLF’s Growth Projection Encourages

The Zacks Consensus Estimate for Sun Life’s 2025 earnings per share indicates a year-over-year increase of 9.9%. The consensus estimate for revenues is pegged at $30.5 billion, implying a year-over-year improvement of 31.1%. The consensus estimate for 2026 earnings per share and revenues indicates an increase of 8.3% and 0.9%, respectively, from the corresponding 2025 estimates. The expected long-term earnings are pegged at 7%.

Optimist Analyst Sentiment on SLF

Five of the six analysts covering the stock have raised their estimates for 2025 and 2026 over the past 30 days. The Zacks Consensus Estimate for 2025 earnings has moved up 1.3% in the past 30 days, while the same for 2026 has moved up 1.8% in the same time frame.

Average Target Price for SFL Suggests Upside

Based on short-term price targets offered by 12 analysts, the Zacks average price target is $65.59 per share. The average indicates a potential 6.7% upside from the last closing price.

SLF’s Favorable Return on Capital

SLF’s return on equity (ROE) for the trailing 12 months is 17.1%, better than the industry average of 14.8%. This reflects SLF’s efficiency in utilizing shareholders’ funds. Also, return on invested capital (ROIC) for the trailing 12 months was 0.7%, better than the industry average of 0.6%. This reflects SLF’s efficiency in utilizing funds to generate income.

Key Points to Note for SLF

Sun Life’s targeted acquisitions are reshaping its global footprint and driving growth. Over 10 strategic deals have strengthened U.S. health and group benefits with DentaQuest, expanded in Asia through the IPO of its India Asset Management JV, and enhanced care services via PinnacleCare.

These moves have also cemented its position as the second-largest dental network in the United States, deepened its presence in Vietnam, Indonesia, and India, and boosted its wealth and real estate platforms.

Sun Life is also enhancing its expertise in private fixed income, mortgages, and real estate through investments for pension plans and other institutional clients. This expansion strengthens the company’s Asset Management pillar, characterized by higher return on equity, lower capital requirements, reduced volatility, and potential earnings upside.

Sun Life’s expenses have risen in recent years, driven by higher employee costs, premises and equipment, service fees, amortization of intangible assets, and other operating expenses. The high costs associated with hedging could pressure profitability, even though the strategy is intended to limit earnings volatility from equity market and interest rate fluctuations.

Conclusion

Sun Life has demonstrated solid strategic execution, expanding its presence across key markets and strengthening its asset management platform. These initiatives support long-term growth and earnings stability. However, rising operating expenses and ongoing hedging costs remain a drag on near-term profitability, limiting the potential for meaningful upside in the current environment.

Given the premium valuation, investors should wait for some time before taking a call on this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research