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Wondering if Voya Financial stock is offering good value at current levels, or if the recent excitement has already been priced in.
After a relatively flat week with the share price edging down 0.2%, the stock has returned 10.9% over the last month, 7.7% year to date and 20.2% over the past year, with longer term returns of 23.9% over three years and 34.5% over five years.
Recent coverage has focused on Voya Financial as a US$81.44 per share diversified financial company, with attention on how its current market price lines up against standard valuation yardsticks. This backdrop is prompting investors to reassess whether the stock’s performance over the past few years still matches its fundamentals.
On Simply Wall St’s valuation checks, Voya Financial earns a value score of 5 out of 6, which sets the stage for a closer look at how different valuation methods assess the stock and points to an even richer way of thinking about valuation coming up later in this article.
The Excess Returns model looks at how much value a company can create over and above the return that shareholders require, then capitalizes those surplus earnings into an intrinsic value per share.
For Voya Financial, the model starts with a Book Value of $50.41 per share and a Stable EPS of $9.05 per share, based on weighted future Return on Equity estimates from 4 analysts. The implied Cost of Equity is $5.10 per share, so the Excess Return is $3.95 per share. This means the model assumes earnings that exceed the required return on equity capital.
The Average Return on Equity used is 14.83%, and the Stable Book Value is $61.01 per share, based on weighted future Book Value estimates from 7 analysts. Feeding these inputs into the Excess Returns framework gives an estimated intrinsic value of $142.87 per share.
Compared with the current share price of $81.44, this implies the stock is 43.0% undervalued on this measure.
For profitable companies, the P/E ratio is a straightforward way to see how much you are paying for each dollar of earnings. This makes it a practical anchor when you are comparing stocks or sanity checking more complex models.
A “normal” or “fair” P/E generally reflects what investors expect for growth and how much risk they see in those earnings. Higher expected growth or lower perceived risk tends to support a higher P/E, while slower growth or higher risk usually points to a lower one.
Voya Financial currently trades on a P/E of 11.56x. That sits below the Diversified Financial industry average of 16.90x and well below the peer group average of 37.42x. Simply Wall St’s Fair Ratio for the stock is 14.82x. This is its proprietary estimate of what Voya Financial’s P/E might be given factors such as earnings growth, profit margins, industry, market cap and company specific risks.
This Fair Ratio is more tailored than a simple comparison with peers or the industry, because it adjusts for the company’s own characteristics rather than assuming all financial stocks deserve the same multiple. With the current P/E at 11.56x versus a Fair Ratio of 14.82x, the shares screen as undervalued on this metric.
Upgrade Your Decision Making: Choose your Voya Financial Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives are introduced here as simple stories you can build around Voya Financial that link your view of its business, the forecast for revenue, earnings and margins, and the fair value you think is reasonable. All of this comes together within an easy tool on Simply Wall St’s Community page that updates when new earnings or news arrive and helps you compare that fair value to the current price to frame buy or sell decisions. One investor might build a Narrative closer to the highest analyst fair value of US$100 if they focus on digital investment and retirement platform scale, while another might sit nearer the US$70 low if they are more focused on fee pressure, medical cost volatility and acquisition or regulatory risks.
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.
