Does E-L Financial’s 26.5% 2025 Surge Signal More Room to Grow?

• Wondering if E-L Financial is currently a bargain or overpriced? You have landed in the right place to get a clear, objective take on its true value.
• While the stock dipped slightly by 0.8% in the past week, it is up an impressive 26.5% year-to-date and has surged 229.6% over the last five years, catching the attention of both growth seekers and value hunters.
• Recent headlines have highlighted the company's strategic initiatives and its evolving investment portfolio, which many analysts see as key drivers behind the stock's long-term momentum. Investors are weighing these updates as signals for potential shifts in risk and future growth prospects.
• E-L Financial scores a 4 out of 6 on our value assessment, meaning it appears undervalued in most critical areas evaluated. Next, we will break down how different valuation approaches stack up for E-L Financial, and later reveal a perspective that gives an even fuller picture of what the stock is really worth.

Find out why E-L Financial's 27.0% return over the last year is lagging behind its peers.

Approach 1: E-L Financial Excess Returns Analysis

The Excess Returns valuation model estimates the company’s intrinsic worth by measuring how much return E-L Financial generates above its cost of equity, based on how efficiently it reinvests capital. This model highlights the company’s historical ability to create value for shareholders through strong, sustained profitability.

For E-L Financial, the key figures are:

• Book Value: CA$24.95 per share
• Stable EPS: CA$2.95 per share (Source: Median Return on Equity from the past 5 years.)
• Cost of Equity: CA$1.32 per share
• Excess Return: CA$1.62 per share
• Average Return on Equity: 13.62%
• Stable Book Value: CA$21.64 per share (Source: Median Book Value from the past 5 years.)

According to this model, E-L Financial’s intrinsic value is significantly higher than its current market price, implying the stock is about 76.0% undervalued. This result reflects E-L Financial’s consistent ability to generate returns in excess of its capital costs, which is a positive sign for long-term investors looking for value hidden beneath the surface.

Result: UNDERVALUED

Our Excess Returns analysis suggests E-L Financial is undervalued by 76.0%. Track this in your watchlist or portfolio, or discover 921 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for E-L Financial.

Approach 2: E-L Financial Price vs Earnings

The price-to-earnings (PE) ratio is a widely used metric for valuing profitable companies because it gives investors a way to compare the price they pay for each unit of earnings. This makes PE particularly suitable for established businesses like E-L Financial that generate consistent profits.

Interpreting what counts as a “normal” or “fair” PE ratio depends on factors such as how quickly a company’s earnings are expected to grow, how risky those earnings are, and broader market conditions. Faster-growing, lower-risk companies often command higher PE multiples, while more mature or riskier businesses usually trade at lower levels.

E-L Financial currently trades at a PE of 4.49x, which is well below both the insurance industry average of 11.67x and the average of its peer group at 12.48x. On the surface, this makes the stock look attractively priced compared to competitors.

However, Simply Wall St’s proprietary “Fair Ratio” takes things further by incorporating a more comprehensive set of factors including E-L Financial’s growth prospects, profit margins, risk profile, size, and industry dynamics. This results in a more nuanced benchmark than peer or industry averages alone.

Comparing the Fair Ratio to E-L Financial’s actual PE, the stock still screens as undervalued. This suggests there is value opportunity for investors who focus on rigorous fundamentals over simple comparisons.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1440 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your E-L Financial Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is your personal story behind the numbers, where you combine your unique perspective on a company with your assumptions about its future revenue, earnings, and margins to estimate its fair value.

Rather than just relying on ratios or analyst opinions, a Narrative empowers you to link E-L Financial’s business story, such as its strategy, industry changes, or leadership decisions, directly to your financial forecasts and the fair value you believe the stock deserves. This approach is incredibly easy to use and is available right on Simply Wall St’s Community page, trusted by millions of investors worldwide.

Narratives help you decide when to buy or sell by letting you clearly see the gap between your Fair Value estimate and the current Price, and they update automatically as new information like news or earnings reports become available. For example, some E-L Financial investors may set a conservative Narrative with a lower fair value based on slow growth, while others might build an optimistic Narrative with higher estimates, reflecting more aggressive expectations for future performance.

Do you think there's more to the story for E-L Financial? 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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