Migdal Insurance (TASE:MGDL): Assessing Valuation After TA-35 Index Inclusion Boosts Investor Interest

Migdal Insurance and Financial Holdings (TASE:MGDL) is making headlines after being added to the TA-35 Index. Inclusion in the index often attracts more attention from investors and fund managers alike.

See our latest analysis for Migdal Insurance and Financial Holdings.

The stock’s momentum has been hard to ignore, with a 30-day share price return of 19.07% and a year-to-date rally of 95.55%. Migdal’s addition to the TA-35 Index has clearly caught the market’s attention. Long-term holders have benefited from an impressive 117.46% total shareholder return over the past year. This suggests that optimism is building fast around the company’s prospects.

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But with Migdal’s rapid climb and a wave of positive sentiment, does this mean the stock is still undervalued? Or has the market already priced in all the future growth investors are hoping for?

Price-to-Earnings of 14.3x: Is it justified?

Migdal Insurance and Financial Holdings currently trades at a price-to-earnings (P/E) ratio of 14.3x, with its recent close at ₪13.55. This multiple places Migdal below the Israeli market average (16.3x), hinting at potential undervaluation relative to local peers. However, the narrative is more nuanced when compared with its industry group.

The P/E ratio is a widely used metric that compares a company's share price to its per-share earnings, providing investors a sense of how much they are paying for a unit of earnings. For an insurance company like Migdal, this multiple is especially relevant as it encapsulates the market’s assessment of recent profit performance and future prospects.

While Migdal trades at a cheaper P/E relative to the local market, the company is actually more expensive than the broader Asian insurance industry, which averages just 11x. This suggests that the market may be pricing in higher expectations for Migdal than other insurance players regionally. Factors such as recent index inclusion and historical outperformance may be influencing sentiment, despite softer profit margins and some negative earnings growth this year.

See what the numbers say about this price — find out in our valuation breakdown.

Result: Price-to-Earnings of 14.3x (ABOUT RIGHT)

However, softer profit margins and recent negative earnings growth could signal headwinds for Migdal if the company cannot return to stronger fundamentals soon.

Find out about the key risks to this Migdal Insurance and Financial Holdings narrative.

Another View: SWS DCF Model Suggests Overvaluation

While Migdal’s price-to-earnings ratio points to reasonable value versus peers, our SWS DCF model offers a very different perspective. According to this method, Migdal is trading well above its estimated fair value of ₪8.94. This raises questions about whether the current price fully reflects future growth potential. Can recent momentum really sustain this kind of premium?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Migdal Insurance and Financial Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 878 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Migdal Insurance and Financial Holdings Narrative

If you think there’s more to Migdal's story or want to test your own analysis, you can craft your own view in just a few minutes. Do it your way

A great starting point for your Migdal Insurance and Financial Holdings research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

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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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