Is the Standard Life Aberdeen PLC share price undervalued after 46% fall in one year?

Could Standard Life Aberdeen PLC (LON:SLA) (SLA.L) offer a margin of safety?

Standard Life Aberdeen PLC
Standard Life Aberdeen PLC

The Standard Life Aberdeen PLC (LON:SLA) (SLA.L) share price has dropped by 46% in the last year in what has been a challenging period for the fund management company.

In my view, it has been hurt by general weakness in the FTSE 100, as well as uncertainty regarding its merger. In terms of wider risks, investors have clearly become increasingly unsure about the growth rate for the world economy. Risks such as further tariffs on imports and the potential for a rising US interest rate could lead to a slowing in the world’s economic growth rate, and investors appear to be pricing in this risk.

Alongside this, Standard Life Aberdeen’s merger seems to have caused some uncertainty in terms of its financial prospects. It lost its biggest customer earlier in the year, while it is expected to post a fall in EPS of 24% in 2018. As well as this, it is embarking on a restructuring which includes asset disposals, and this could cause a period of instability in the short run.

Next year, the business is due to return to EPS growth with an 8% rise in profit forecast by the market. It now has a dividend yield of over 7%, which is relatively high for a FTSE 100 share and I believe could suggest that it offers good value for money.

I feel that it has a sound overall strategy, and that it could be stronger as a result of the merger. I’m also bullish about the prospects for the world economy, and particularly emerging markets, over the long run. I think they could provide Standard Life Aberdeen with a potential catalyst in future years.

As a result, I’m cautious about the stock’s near-term outlook given current market conditions. But in the long run, I think its strategy and valuation could help it to deliver a successful recovery after what has been a challenging period.

About Robert Stephens 5138 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email [email protected] or use one of the other contact methods available on the 'Contact Us' page