Right now I’m looking at some of the most popular companies in the FTSE 100 to try and establish whether or not they have the potential to return to historic highs.
Today I’m looking at Prudential (LSE: PRU) (NYSE: PUK.US) to ascertain if its share price can return to 1,302p.
Initial catalyst
As usual before we establish whether or not Prudential can return to 1,302p, we need to figure out what caused it to get there in the first place.
It would appear that Prudential reached this high during the last few days of November this year, when the company rallied along with the broader insurance sector. Unfortunately, since reaching this high, Prudential has followed the wider market lower.
But can Prudential return to its former glory?
Nonetheless, it would appear that Prudential is already primed to return to its all-time high, or even higher. You see, Prudential’s management recently announced its roadmap for growth during the next few years and the company’s targets are highly impressive.
For example, the company is aiming to expand profits within Asia by 15% per annum during the next four years. Furthermore, during this period Prudential aspires to generate cash flow in excess £1 billion within the region.
In addition, Prudential is planning on generating £10 billion in cash from global operations during the next four years — that’s around 30% of the company’s current market capitalization.
Off the back of these targets, City analysts expect the company to grow earnings per share 4% this year and then 19% during 2014. What’s more, many City analysts believe that the company will offer investors a special dividend if Prudential reaches its targeted cash generation.
Indeed, based on current estimates, Prudential is expected to report earnings per share of 95p for 2014. This implies that the company is trading at a forward P/E of 13.4, below the life insurance average of 21.
However, I should note that every year for the past five, Prudential has beaten analysts’ estimates by a significant amount and I doubt the next two years will be any different.
Foolish summary
So overall, based on Prudential’s loft growth targets I feel that that the company’s share price can return to 1,302p.
