Could this FTSE 100 industry giant be one of the best shares to buy now?

This leading stock is 25% down from its pre-pandemic level. With compelling growth prospects, is it one of the best shares to buy now?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Prudential (LSE: PRU) is a giant among FTSE 100 insurers. Its market capitalisation is not far short of £30bn. This dwarfs the £11.3bn market value of its nearest rival, Aviva. With its current price 25% below its pre-pandemic 2020 high, could industry titan Prudential be one of the best shares to buy now?

An evolving company

Prudential has been undergoing considerable change in the last couple of years. On 14 March 2018, it announced its intention to demerge its UK and Europe business, resulting in two separately listed FTSE 100 companies. It took until 21 October 2019 to complete the demerger of what is now M&G.

This year Prudential has announced its intention to divest its US business (Jackson). Again, this will result in two separately listed companies. Jackson is expected to be solely listed in the US. The move would leave Prudential focused exclusively on its high-growth Asia and Africa businesses.

One of the best shares to buy in 2019?

I tipped Prudential a couple of times in 2019, between the time it announced its intention to demerge and the completion of the demerger. On 23 March, the share price was 1,560p and on 29 September, it was 1,460p.

These prices compared with a group sum-of-the-parts (SOTP) valuation of near to 2,000p. For every Prudential share owned, investors received one in M&G. As such, when the demerger completed, I expected the total of the Prudential and M&G share prices to move closer to the 2,000p SOTP valuation.

The table below shows what happened on the date of the demerger, and a couple of key dates subsequently.


share price (p)

share price (p)

Total (p)

23/3/19 (tip #1)




14/8/19 (tip #2)




21/10/19 (demerger)




12/2/20 (PRU year high)




29/9/20 (current price)




As you can see, when M&G was demerged on 21 October 2019, there was a positive return at 1,584p on my tip #1 (1,560p) and tip #2 (1,460p).

By 12 February this year, the return was up to 1,752p, moving nicely towards that 2,000p SOTP valuation. Then, of course, came the pandemic and stock market crash.

One of the best shares to buy now?

I’ve tipped Prudential several times during the market crash, most notably at 734p on 17 March. However, the shares have since staged quite a recovery. At the current price of 1,132p, do I think this remains one of the best stocks to buy now?

Despite the bounce from the lows, the shares are still trading at a hefty discount – currently 25% – to their pre-pandemic high of 1,506p. At today’s 1,132p, the market is valuing Prudential at just 8.8 times forecast 2020 earnings. If the share price returned to 1,506p, the multiple would rise to 11.7 times, which I consider still undemanding.

This is particularly so, because analysts have pencilled-in 10% earnings growth next year. Furthermore, with the potential value-unlocking separation of the Jackson business, and Prudential then focused on high-growth markets in Asia and Africa, I think 10% annual earnings growth could be sustainable.

There are a good number of quality blue chips trading at discount prices. But I reckon Prudential’s long-term growth prospects make it one of the best shares to buy now.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Prudential. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Jumbo jet preparing to take off on a runway at sunset
Investing Articles

Down 70%+ since 2020, is IAG’s share price an unmissable bargain?

IAG’s share price is still down around 73% from its pre-Covid level, but with the business performing well last year,…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

£17,000 of shares in the FTSE 100 dividend giant can make me £18,874 every year in passive income!

This FTSE 100 dividend superstar has an 8.8% yield with dividends projected to rise. It looks very undervalued to me…

Read more »

Investing Articles

2 top UK growth stocks I’m buying for my Stocks and Shares ISA in July

Looking for UK-listed growth firms to add to a Stocks and Shares ISA? Our writer highlights two he's planning to…

Read more »

artificial intelligence investing algorithms
Investing Articles

This overvalued growth stock makes Nvidia look cheap!

ARM Holdings is a growth stock that’s benefitted from the AI rally. Muhammad Cheema takes a look at whether this…

Read more »

Investing Articles

1 penny stock I’d buy today while it’s 63p

This penny stock's down 70% since last March, yet could be set for a big comeback as the firm rebuilds…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

Buying 8,617 Legal & General shares would give me a stunning income of £1,840 a year

Legal & General shares offer one of the highest dividend yields on the entire FTSE 100. Harvey Jones wants to…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

£25k to invest? Here’s how I’d try to turn that into a second income of £12,578 a year!

If Harvey Jones had a lump sum to invest today he'd go flat out buying top FTSE 100 second income…

Read more »

Union Jack flag in a castle shaped sandcastle on a beautiful beach in brilliant sunshine
Investing Articles

2 lesser-known dividend stocks to consider this summer

Summer is here and global markets could be heading for a period of subdued trading. But our writer thinks there…

Read more »