Are AMP shares worth keeping?

Here are some factors to consider.

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Key points
  • AMP shares have been sold off heavily in the past five years
  • One expert now believes there are problems in AMP's fundamentals
  • But despite this, AMP is buying back its own shares, which could signal management believes they'll be worth more in the future

The AMP Ltd (ASX: AMP) share price is down 76% over the past five years and a staggering 91% since the company's shares first traded in January 1999.

By comparison, the S&P/ASX 200 Financials Index (ASX: XFJ) has dropped 4.84% over the past five years, with AMP's financial sector peers pulling well ahead of it.

No doubt, it's been a hard road for the financial services provider but now an expert has pointed out some major flaws in AMP's fundamentals.

A woman sits at a computer with a quizzical look on her face with eyerows raised while looking into a computer, as though she is resigned to some not pleasing news.

Image source: Getty Images

What did the expert say?

Shaw and Partners' senior investment advisor Jed Richards has slapped AMP with a sell rating.

Richards is pessimistic about the company's long-term growth prospects, saying:

The company has been a poor performer for many years. In our view, its first-half 2022 results showed weak earnings growth in its bank and wealth divisions. While recent asset sales may provide a payout boost to shareholders in the short term, they remove a key growth component from the company's business strategy. We believe AMP will require significant re-investment to regain lost scale.

In AMP's most recent half-year results, group profits dived to $117 million, down 24.5% from the prior corresponding period.

Let's check what else has been impacting the company recently.

What else happened?

At the beginning of September, AMP announced it would buy back 32 million of its own shares for a total value of $350 million. This is part of a planned $1.1 billion capital redistribution to shareholders, announced to the market in August.

Also this month, AMP missed out on a huge payday from losing control of its AMP Capital Retail Trust (ACRT).

The fund manages $2.7 billion of assets. It means the total potential earn-out from the sale of Collimate Capital's real estate and infrastructure business has fallen to just $20 million.

The sale originally came with an earn-out potential of $300 million but that dropped to $75 million when AMP previously lost control of its $7.7 billion AMP Capital Wholesale Office Fund (AWOF) in July.

Meantime in August, the company enjoyed a rally in its share price amid rumours AMP proposed a final offer to buy the Westpac Banking Corp (ASX: WBC) wealth management business.

AMP share price snapshot

The AMP share price is currently $1.17, down 2.09% so far today, while the S&P/ASX 200 Financials Index (ASX: XFJ) is 2.81% lower in early afternoon trade.

Despite the gloom surrounding the company today, AMP shares are up 17% year to date while the S&P/ASX 200 Index (ASX: XJO) has lost almost 10% over the same period.

AMP's current market capitalisation is around $3.8 billion.

Motley Fool contributor Matthew Farley has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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