- Wondering if Aflac at around US$106 is offering good value right now, or if most of the opportunity has already played out.
- The stock is roughly flat over the last year with a 0.3% return, even after a 2.3% decline over the past week and a 6.8% decline over the past month, set against a much stronger 80.4% return over 3 years and 131.0% over 5 years.
- Recent coverage has focused on Aflac's position in the insurance sector and how investors weigh its long track record against current pricing. This helps explain why the share price has been relatively steady over 12 months. There has also been attention on how interest rate expectations and sector sentiment may be feeding into the shorter term pullback.
- On Simply Wall St's valuation checks, Aflac scores 2 out of 6. Next you will see how different valuation methods assess the stock, and then a final section will look at a broader way to think about value beyond these models.
Aflac scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Aflac Excess Returns Analysis
The Excess Returns model looks at how efficiently Aflac turns shareholder equity into profits above the return that investors typically require. It compares the company’s return on equity to its estimated cost of equity and capitalizes those surplus returns into an intrinsic value per share.
For Aflac, the model uses a Book Value of $56.85 per share and a Stable EPS of $8.46 per share, based on weighted future Return on Equity estimates from 4 analysts. The Average Return on Equity is 14.09%, while the Cost of Equity is $4.19 per share. That leaves an Excess Return of $4.27 per share. The Stable Book Value input is $60.05 per share, sourced from weighted future Book Value estimates from 7 analysts.
Putting these pieces together, the Excess Returns model arrives at an estimated intrinsic value of about $179.78 per share. Against a current share price around $106, the model implies the stock is 40.9% undervalued on this basis.
Result: UNDERVALUED
Our Excess Returns analysis suggests Aflac is undervalued by 40.9%. Track this in your watchlist or portfolio, or discover 53 more high quality undervalued stocks.
Approach 2: Aflac Price vs Earnings
For established, profitable companies like Aflac, the P/E ratio is a commonly used way to relate what you pay for the stock to the earnings the business is generating. It helps you see how many dollars investors are currently willing to pay for each dollar of earnings.
What counts as a “normal” or “fair” P/E usually reflects how the market views a company’s growth prospects and risk. Higher expected growth or lower perceived risk can support a higher multiple, while lower growth or higher risk tends to point to a lower one.
Aflac is currently trading on a P/E of 15.01x. That is above the Insurance industry average P/E of 10.79x and also above the peer group average of 13.72x. Simply Wall St’s Fair Ratio metric for Aflac is 12.32x. This is an estimate of the P/E that would be consistent with factors such as earnings growth, profit margin, industry, market cap and risk profile.
Compared with simple peer or industry comparisons, the Fair Ratio gives a more tailored yardstick because it adjusts for Aflac’s own fundamentals rather than treating all insurers as the same. Since the current 15.01x P/E is higher than the 12.32x Fair Ratio, the shares screen as overvalued on this measure.
Result: OVERVALUED
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Upgrade Your Decision Making: Choose your Aflac Narrative
Earlier it was mentioned that there is an even better way to understand valuation. On Simply Wall St you can use Narratives on the Community page to attach your own story about Aflac, link that story to explicit forecasts for revenue, earnings and margins, see the fair value those assumptions imply, and then compare that fair value to the current price. The system updates automatically as new news or earnings arrive. This is why one analyst driven Narrative on Aflac can point to a fair value near the high end of the range at about US$130, while a more cautious view sits closer to US$100. This gives you a clear framework for deciding how your view lines up with others and what that means for your own investment decisions.
Do you think there's more to the story for Aflac? Head over to our Community to see what others are saying!
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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