Trading at 732p per share, Prudential (LSE:PRU) has been one of the worst-performing FTSE 100 shares in recent times. A 22% share price fall over the past six months makes it one of the index’s top 10 biggest losers over the periodfrdr .
I think this represents an attractive dip-buying opportunity. And especially after the life insurance giant’s blockbuster trading update of last week.
I already own the Footsie business in my Stocks and Shares ISA. Here’s why I’m aiming to increase my stake at the next opportunity.
A stunning update
It came as a shock to see Prudential’s share price slump following 2023’s blowout results. On Wednesday (20 March), the company announced new business profits had rocketed 43% to $3.1bn.
This was thanks in large part to a healthy uptick in new business profit margins. At actual exchange rates, these improved to 53% from 50% in 2022, well ahead of City forecasts.
The Pru said that “our performance reflects the breadth and broad based nature of our markets, with new business profit growing in 17 of our 22 life markets and an increased market share in seven of our Asian life markets.”
Profits have jumped following the end of Covid-19-related lockdowns in China. These changes especially benefitted its Hong Kong operations, where the firm has a leading position in selling products to travellers from China.
Silence isn’t golden
So what explains the market’s unfavourable reaction? My take is that investors continue to be spooked by tough economic conditions in China, and by extension the broader Asian region.
Investors may also have been put off by Prudential’s failure to provide more detail on current trading conditions in China. Given the company’s prolonged share price weakness, they may have been expecting some soothing words from the insurer.
That said, news that “sales growth has continued in the first two months of 2024” is an encouraging sign, and especially given the tough year-on-year comparatives.
A top dip-buy
That’s not to say that Prudential is out of the woods.
A lumpy economic recovery in China could have significant impact on new business in 2024. Fresh geopolitical tension between Beijing and other national capitals could also pull the share price still lower.
That said, it’s my belief that these threats are more than baked into Prudential’s battered share price. The company now trades on a price-to-earnings (P/E) ratio of 9.2 times, below the FTSE 100 average of 10.5 times.
Moreover, its price-to-earnings-to-growth (PEG) ratio sits at a mega-low 0.5. Any reading below 1 indicates that a share is undervalued.
I bought Prudential shares to capitalise on the rapidly growing life insurance market in Asia and Africa. And while the business has hit a roadbump more recently, the outlook in these lucrative regions remains very bright.
It’s why The Pru expects to grow new business profits at a compound annual rate of 15%-20% through to 2027.
I think the company is one of the FTSE 100’s greatest bargains today. So I’ll be looking to buy more of its shares when I next have cash to invest.
