Assessing AMP (ASX:AMP)’s Valuation as Class Action Settlement Signals Progress on Legacy Issues
AMP (ASX:AMP) has moved to settle a longstanding class action over historic adviser commissions with a proposed A$29 million agreement, aiming to draw a line under legacy conduct risks and refocus investors on its core operations.
See our latest analysis for AMP.
The announcement has landed against a backdrop of solid share price momentum, with AMP delivering a year to date share price return of 15.67 percent and a three year total shareholder return of 45.18 percent. This suggests investors see legacy risks slowly easing.
If this clean up story has you thinking about where else capital could work harder, it might be worth exploring fast growing stocks with high insider ownership as a source of fresh ideas.
With AMP trading only slightly below analyst targets after a strong three year run, but still facing shrinking revenue, is this cleanup phase giving investors a genuine value opportunity, or is the market already pricing in the turnaround?
Most Popular Narrative: 3.4% Undervalued
With AMP last closing at A$1.85 against a narrative fair value of A$1.91, the story hinges on whether shrinking revenue can coexist with rising profitability.
The company's significant progress in digital transformation including the launch of AMP Bank GO, integration of AI to improve adviser efficiency, and rollout of digital advice modules is expected to drive operational efficiency, enhance customer retention/acquisition, and improve cost to income ratios and net margins over time.
Curious how a business with falling top line can still justify a richer future earnings multiple and margin profile? The narrative leans on a powerful mix of cost transformation, capital discipline, and a profit trajectory that is bolder than current results imply. Want to see the exact earnings ramp and margin lift that underpin that A$1.91 fair value call? Read on and unpack the full playbook behind this recovery thesis.
Result: Fair Value of $1.91 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, persistent margin pressure and lingering litigation or remediation surprises could still upset the recovery trajectory and challenge the narrative of improving margins and earnings.
Find out about the key risks to this AMP narrative.
Another View: Market Multiple Sends a Different Signal
Our SWS DCF model may see upside, but the earnings multiple tells a tougher story. AMP trades on about 27 times earnings versus a fair ratio of 19.2 times, a steep premium that suggests limited margin for error if the margin recovery or buybacks slip.
See what the numbers say about this price — find out in our valuation breakdown.
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Build Your Own AMP Narrative
If you see the story differently or want to stress test the numbers yourself, build a personalised view of AMP in minutes with Do it your way.
A great starting point for your AMP research is our analysis highlighting 1 key reward and 1 important warning sign that could impact your investment decision.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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