SLF Outperforms Industry, Trades at a Premium: How to Play the Stock

Shares of Sun Life Financial Inc. SLF have gained 10.2% year to date, outperforming its industry, and the Zacks S&P 500 Composite’s growth of 2.8% and 6.3% respectively. This third-largest insurer in Canada has a market capitalization of approximately $36.9 billion. The average volume of shares traded in the last three months was 0.6 million.

SLF vs Industry, Sector & S&P 500 YTD

Sun Life Financial has outperformed its peers, Manulife Financial Corp MFC and Primerica, Inc. PRI, which have gained 3.8% and 2.2%, respectively. Shares of Reinsurance Group of America, Incorporated RGA have lost 7.4% year to date.

SLF Trading Above 50-Day and 200-Day Moving Averages

Shares of Sun Life closed at $65.40 on Thursday and are trading above the 50-day and 200-day simple moving averages (SMA) of $62.84 and $58.13, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

SLF Shares are Expensive

Sun Life Financial shares are trading at a premium to the industry. The company’s price-to-earnings ratio of 11.92X is higher than the industry average of 8.12X.

Average Target Price for SFL Suggests Downside

Based on short-term price targets offered by 12 analysts, the Zacks average price target is $64.73 per share. The average indicates a potential 1% downside from the last closing price.

SLF’s Favorable Return on Capital

SLF’s return on equity (ROE) for the trailing 12 months is 17.3%, better than the industry average of 15.4%. 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 0.66%. This reflects SLF’s efficiency in utilizing funds to generate income.

SLF’s Growth Projection Encourages

The Zacks Consensus Estimate for Sun Life’s 2025 earnings per share indicates a year-over-year increase of 8.4%. The consensus estimate for revenues is pegged at $29.8 billion, implying a year-over-year improvement of 28%. The consensus estimate for 2026 earnings per share and revenues indicates an increase of 7.8% and 1.1%, respectively, from the corresponding 2025 estimates.

Optimist Analyst Sentiment on SLF

Five of the six analysts covering the stock have raised their estimates for 2025, and each of the six analysts has increased their estimate for 2026 over the past 60 days. Thus, the Zacks Consensus Estimate for 2025 and 2026 earnings has both increased 2.5% in the past 60 days.

Key Points to Note for SLF

Sun Life is scaling its international growth by targeting Asia’s high-return emerging markets, now operating in seven countries to capitalize on rising demand and underpenetrated insurance sectors. The company is making targeted investments across Asia to sustain its growth momentum.

To mitigate exposure to equity markets and interest rate fluctuations and reduce earnings volatility from external forces, Sun Life is pivoting toward capital-efficient products with more predictable income, such as mutual funds and group benefits. It is also scaling its voluntary benefits portfolio through new product launches, with the strategic aim of securing a top-five position in this segment.

Supported by a strong capital base and operational efficiency, Sun Life announced a 4.7% dividend increase in May 2025, reaffirming its commitment to delivering shareholder value. This reflects confidence in future earnings and underlines its robust cash generation. By targeting a balanced payout ratio and prioritizing ROE enhancement, the company reinforces investor trust while preserving its financial flexibility.

However, expenses are on the rise, primarily due to higher employee costs, expenditures on premises and equipment, service fees, amortization of intangible assets, and other operational expenses. To manage earnings volatility stemming from fluctuations in equity markets and interest rates, Sun Life has incurred hedging costs, which, while helping to stabilize results, have put some pressure on overall earnings.

Conclusion

In conclusion, Sun Life’s measured approach of expanding in growth-oriented Asian markets, shifting toward more stable and capital-efficient products, and maintaining disciplined capital management reflects its focus on steady performance and shareholder value.

Given the premium valuation, investors should wait for a better entry point for this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

Zacks Investment Research