Insurance company Wise (LSE: PRU) Largest FTSE 100 Defeated today. Its share price fell 8% after weakening in Asian markets. This could be a great opportunity for me to buy stock or a good time to avoid it. It all depends on what your prospects look like.
What works for Prudential
Its focus on Asia and Africa means that the insurance and asset management company is growing its business in a growing economy. Rapid revenue growth now and in the future could create demand for its products. Its recent results are also looking good. Its consolidated operating profit increased 22% for the half-year ended June 30 compared to the same period last year.
The downside of the FTSE 100 stock
However, Prudential’s share price is not among the best performers. This is nicely back from the stock market crash of March 2020, which I use as a go-to reference point to determine how far the FTSE 100 stock has come from its lowest point. It has almost doubled since then. But last year, the increase was only 14% until the end. And the number will be even smaller after today’s sharp fall.
In addition, the company does not pay too much dividend. Its dividend yield is less than 1%. This means that if I buy the stock, it is only with the increase in mind. And it didn’t show much either.
Depression can persist
It may come back from the sharp fall seen today, as it has very little to do with the fall. Two news items from Chinese property developer Evergrand have cast a shadow of mourning over the global capital market. It is not surprising that Prudential, with its Asia focus, has been particularly damaged. Since some more rationality has been set, things may seem better for it.
At the same time, there is no way to know now whether the Evergrand situation will continue as a single event or the softening of the stock market. The predictions of the Day of Judgment are becoming more frequent and rapid compared to the current situation in 2008. We’ll know how things go in the next few days.
An alternative stock to buy deep
In the meantime, I will avoid Prudential stocks. Instead, in the case of insurance stocks, I will consider the choices Legal and general. It has seen its share price rise more than 50% in the past year, much higher than Prudential. In addition, it pays very large dividends. Its dividend yield is 6.4%, which is about three percentage points higher than the average FTSE 100 dividend yield. And its price-to-earnings ratio is 8.3% lower, which is about half of the Prudential ratio.
Last but not least, its share price is low today. It’s a lot lower by 3.5%, but if there’s a stock I would like to buy to sink, this is it.
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Manika Premsingh has no position in any of the shares mentioned. Motley Flower UK Prudential has recommended. The opinions expressed in the companies mentioned in this article may differ from those of the authors and therefore the official recommendations we make on our subscription services such as Share Advisors, Hidden Winners and Pro. Here at The Motley Flower we believe that considering a variety of insights makes us a better investor.