In the last year the Standard Life Aberdeen PLC (LON:SLA) (SLA.L) share price has fallen by around 50%. That’s an exceptionally poor performance from a FTSE 100 company which earlier in the year appeared to have a bright future following its merger.
Since then, though, investor sentiment towards global stock markets has come under severe pressure. Emerging markets may also have lost their appeal – for now at least – in the minds of investors. There are concerns surrounding the prospect of three or four interest rate rises that are forecast in the US over the next year. They could increase debt-servicing costs across the developing world, since much of the debt is denominated in dollars.
Alongside this, Standard Life Aberdeen’s merger has not gone particularly smoothly in my opinion. It lost its biggest customer, Lloyds, soon after the merger and it is due to post a fall in EPS of 23% in the current year. A restructuring could help it to refocus on its core areas, but this does not appear to have captured the imagination of investors who remain downbeat about its stock price potential.
Following its decline, the stock now has a P/E ratio of around 10. This suggests to me that it may offer an improving outlook, since it could have a margin of safety. In the long run, I believe that its revised strategy could help it to generate improving performance. And since it has a strong position in key markets, I feel it could deliver improving EPS growth in future years.
With a dividend yield in excess of 7%, Standard Life Aberdeen is one of the highest-yielding stocks in the FTSE 100 at the moment. This could lead to a relatively high total return in the long run. While volatility may be high in future months, I’m cautiously optimistic about its prospects after what has been a tough year.