iA Financial Corporation Inc.

iA Financial Corporation Inc. (TSX: IAG) is a financial services company and offers a portfolio of life and health insurance products, savings and retirement plans, mutual funds, securities, auto and home insurance, mortgages, and others.

Why Should Investors Book Profit?

• Closed Below 50-Days and 100-Days SMA: On the daily chart, the stock of IAG closed below its immediate support level of 50-days and 100-days, indicating a bearish signal. The above indicates a possible downside from the current level.

Technical Price Chart (as on December 02, 2021). Source: REFINITIV, Analysis by Kalkine Group

• Decline in Topline: Despite an improved gross premium, the company reported a slide in its total revenue due to a loss in fair value of investments. Notably, the company reported its total revenue of CAD 3,834 million and CAD 9,509 million in Q3FY21 and 9MFY21, respectively, lower than CAD 4,099 million and CAD 13,121 million in pcp. Continuation of the above trend might dampen the company’s overall performance. 
  

• Decline in Return Ratios: The company reported its return on common shareholders’ equity of 12.8% (on a TTM basis on September 30, 2021), lower than 13.2% for twelve months ended June 30, 2021, which indicates that the company is becoming less efficient in creating profits and shareholders wealth. The continuation of the above trend might be alarming.

Source: Company Report

Valuation Methodology (Illustrative): Price to Earnings Based

Stock Recommendation:

During the quarter, the company reported higher input costs and posted higher gross benefits and claims on contracts, higher commissions, and higher general expenses. Continuation of the above trend is likely to dampen its profitability and margin. We have valued the stock using the Price to Earnings based relative valuation method and have arrived at a double-digit downside (in percentage terms). For the said purposes, we have considered peers like Manulife Financial Corp, Lincoln National Corp, etc. Considering the aforesaid facts, we recommend a ‘Sell’ rating on the stock of IAG at the last traded price of CAD 69.97 on December 02, 2021, at 09:30 AM ET.

One-Year Technical Price Chart (as on December 02, 2021). Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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