- If you are wondering whether MetLife's current share price reflects its underlying worth, the recent moves in the stock give you plenty to think about.
- The shares last closed at US$70.39, with a 2.6% gain over the past week, a 6.4% decline over 30 days, and returns of 12.4% decline year to date and 13.6% decline over the last year, set against gains of 36.7% and 34.8% over 3 and 5 years respectively.
- Recent headlines around MetLife have focused on the business as a large US insurer, including coverage of its role in long term savings and protection products and commentary on how insurers are positioned within financial markets. Together, this context helps frame how investors are thinking about the balance between earnings power, interest rate sensitivity, and long term obligations when they trade the stock.
- MetLife currently holds a valuation score of 4 out of 6. Next, you will see how different methods like P/E, P/B, and discounted cash flow compare, before finishing with a broader way to think about what valuation really means for your own portfolio decisions.
Find out why MetLife's -13.6% return over the last year is lagging behind its peers.
Approach 1: MetLife Excess Returns Analysis
The Excess Returns model looks at how much profit a company can generate above the return that shareholders require, based on its equity, and then capitalizes those excess profits into an estimated value per share.
For MetLife, the starting point is a Book Value of $43.33 per share and a Stable EPS of $8.78 per share, based on weighted future Return on Equity estimates from 7 analysts. The Average Return on Equity is 15.91%, while the Cost of Equity is $3.85 per share. The difference between what MetLife is expected to earn and what investors require is the Excess Return of $4.93 per share.
This model also uses a Stable Book Value of $55.15 per share, sourced from weighted future Book Value estimates from 6 analysts, to project how these excess returns might build over time. Putting this together, the Excess Returns model arrives at an intrinsic value of about $193.26 per share, which implies the stock is 63.6% undervalued relative to the recent price of $70.39.
Result: UNDERVALUED
Our Excess Returns analysis suggests MetLife is undervalued by 63.6%. Track this in your watchlist or portfolio, or discover 55 more high quality undervalued stocks.
Approach 2: MetLife Price vs Earnings
For a profitable company like MetLife, the P/E ratio is a straightforward way to link what you pay for each share to the earnings that back it. Investors usually look for a P/E that lines up with their expectations for future earnings growth and the level of risk they are willing to take. A higher growth outlook or lower perceived risk can justify a higher “normal” P/E.
MetLife currently trades on a P/E of 14.47x. That sits slightly above the Insurance industry average of 10.92x and very close to the peer average of 14.32x. Simply Wall St also provides a proprietary “Fair Ratio” of 16.01x, which reflects factors such as MetLife’s earnings profile, profit margin, industry, market cap and measured risks.
This Fair Ratio can be more useful than a simple comparison with peers or the broader industry, because it adjusts for company specific characteristics rather than assuming all insurers deserve the same multiple. Comparing the Fair Ratio of 16.01x with the actual P/E of 14.47x suggests MetLife’s shares are trading below that indicated level.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your MetLife Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St’s Community page let you attach a clear story to your numbers by linking your view on MetLife’s future revenue, earnings and margins to a financial forecast and fair value. You can then compare that fair value with the current share price to help you decide whether to buy, hold, or sell. Each Narrative updates automatically when new news or earnings arrive. For example, one investor might build a Narrative around MetLife expanding in high growth international markets, higher margins and share repurchases that points to a fair value closer to the higher analyst target of US$108. Another might focus on risks like compressed investment yields, underwriting margin volatility and credit risk and settle on a fair value near the lower end of US$72.
Do you think there's more to the story for MetLife? 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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