Digital Transformation And Demographic Trends Will Create Lasting Market Opportunity

Key Takeaways

• Investments in digital transformation, holistic financial wellness, and expanded partnerships are driving improved customer experience, operational efficiency, and revenue growth.
  
• Strategic focus on integrated benefits, new client wins, and alternative investment solutions enhances client retention, diversified income streams, and sustained margin expansion.
  
• Fee compression, medical cost volatility, acquisition risks, regulatory uncertainty, and digital competition threaten Voya's growth, margins, and operational stability across business segments.

Catalysts

Provides workplace benefits, and savings solutions and technologies in the United States and internationally.

• The rapidly growing and aging U.S. population is increasing demand for workplace retirement plans, asset management, and annuity products. Voya has surpassed $1 trillion in assets and nearly 10 million participant accounts in retirement, with strong organic net flows and new client wins, suggesting continued topline (revenue) growth and expanding assets under management.
  
• Voya's continued investments in digital transformation-including automation, AI adoption, and expansion of its integrated benefits platform-are improving customer experience and lowering operational costs, providing the potential for durable margin expansion and higher long-term earnings.
  
• The strategic focus on holistic financial wellness and bundled employee benefit solutions (including in-sourced leave management and expanded voluntary offerings) is expected to increase client retention and cross-selling, supporting higher net revenues and improved customer lifetime value.
  
• Successful integration of the OneAmerica acquisition, new distribution partnerships (such as Edward Jones), and a strong ongoing M&A pipeline are driving scale, expanding distribution, and producing operational leverage-each acting as a catalyst for both revenue growth and margin improvement.
  
• Rising demand for alternative and ESG investment solutions, highlighted by partnerships with Blue Owl and strong investment management inflows, positions Voya to capture new asset flows and diversified fee streams, providing future revenue upside and supporting sustainable, higher-margin earnings growth.

Voya Financial Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Voya Financial's revenue will grow by 1.8% annually over the next 3 years.
• Analysts assume that profit margins will increase from 6.2% today to 12.1% in 3 years time.
• Analysts expect earnings to reach $1.0 billion (and earnings per share of $11.91) by about August 2028, up from $492.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $775.9 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.6x on those 2028 earnings, down from 14.7x today. This future PE is lower than the current PE for the US Diversified Financial industry at 16.0x.
• Analysts expect the number of shares outstanding to decline by 1.94% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.01%, as per the Simply Wall St company report.

Voya Financial Future Earnings Per Share Growth

Risks

• Ongoing fee pressure and industry-wide fee compression, particularly in asset management and retirement products due to passive investing and increasing price transparency, may limit Voya's ability to grow net revenues and could compress margins over time.
  
• Accelerating medical cost inflation and increasing volatility in the stop-loss and group benefits businesses introduce significant uncertainty, with management cautioning about future medical trends and potential for unfavorable claims development, which could negatively impact earnings and profitability.
  
• Voya's reliance on inorganic (acquisition-driven) growth, including the OneAmerica acquisition and potential future "roll-up" strategy in retirement, creates execution risk around integration, retention of key accounts and personnel, and capital deployment, potentially leading to earnings volatility or capital shortfalls if synergy targets are missed or integration is disrupted.
  
• Regulatory uncertainty and evolving fiduciary or compliance standards surrounding alternative investments such as private markets (e.g., through partnerships with Blue Owl) and retirement plan offerings create potential risks of increased compliance costs, legal challenges, or product delays, threatening revenue growth and operating margins.
  
• Increased competition from fintechs, insurtechs, and large asset managers with advanced digital capabilities threatens Voya's ability to retain and acquire customers, especially if Voya lags peers in digital transformation, potentially resulting in elevated customer attrition and higher acquisition or servicing costs, which could pressure both revenue growth and net margins.

Valuation

• The analysts have a consensus price target of $82.545 for Voya Financial based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $90.0, and the most bearish reporting a price target of just $64.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $8.3 billion, earnings will come to $1.0 billion, and it would be trading on a PE ratio of 9.6x, assuming you use a discount rate of 9.0%.
• Given the current share price of $74.78, the analyst price target of $82.55 is 9.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.