Could this FTSE 100 industry giant be one of the best shares to buy now?

Prudential (LSE: PRU) is a giant among FTSE 100 insurers. Its market capitalisation is not far short of £30bn. This dwarfs the £11.3bn market value of its nearest rival, Aviva. With its current price 25% below its pre-pandemic 2020 high, could industry titan Prudential be one of the best shares to buy now?

An evolving company

Prudential has been undergoing considerable change in the last couple of years. On 14 March 2018, it announced its intention to demerge its UK and Europe business, resulting in two separately listed FTSE 100 companies. It took until 21 October 2019 to complete the demerger of what is now M&G.

This year Prudential has announced its intention to divest its US business (Jackson). Again, this will result in two separately listed companies. Jackson is expected to be solely listed in the US. The move would leave Prudential focused exclusively on its high-growth Asia and Africa businesses.

One of the best shares to buy in 2019?

I tipped Prudential a couple of times in 2019, between the time it announced its intention to demerge and the completion of the demerger. On 23 March, the share price was 1,560p and on 29 September, it was 1,460p.

These prices compared with a group sum-of-the-parts (SOTP) valuation of near to 2,000p. For every Prudential share owned, investors received one in M&G. As such, when the demerger completed, I expected the total of the Prudential and M&G share prices to move closer to the 2,000p SOTP valuation.

The table below shows what happened on the date of the demerger, and a couple of key dates subsequently.

As you can see, when M&G was demerged on 21 October 2019, there was a positive return at 1,584p on my tip #1 (1,560p) and tip #2 (1,460p).

By 12 February this year, the return was up to 1,752p, moving nicely towards that 2,000p SOTP valuation. Then, of course, came the pandemic and stock market crash.

One of the best shares to buy now?

I’ve tipped Prudential several times during the market crash, most notably at 734p on 17 March. However, the shares have since staged quite a recovery. At the current price of 1,132p, do I think this remains one of the best stocks to buy now?

Despite the bounce from the lows, the shares are still trading at a hefty discount – currently 25% – to their pre-pandemic high of 1,506p. At today’s 1,132p, the market is valuing Prudential at just 8.8 times forecast 2020 earnings. If the share price returned to 1,506p, the multiple would rise to 11.7 times, which I consider still undemanding.

This is particularly so, because analysts have pencilled-in 10% earnings growth next year. Furthermore, with the potential value-unlocking separation of the Jackson business, and Prudential then focused on high-growth markets in Asia and Africa, I think 10% annual earnings growth could be sustainable.

There are a good number of quality blue chips trading at discount prices. But I reckon Prudential’s long-term growth prospects make it one of the best shares to buy now.