Brighthouse Financial (BHF): Assessing Valuation After Major Buyback and Surging Q2 Profits

If you have been watching Brighthouse Financial (BHF) lately, there is a lot to unpack. The company just completed a substantial share buyback program and, despite a drop in revenue, posted a considerable jump in net income for the second quarter compared to the prior year. These moves signal management’s commitment to rewarding shareholders and may reflect increased confidence in the business. Companies often ramp up buybacks when they believe their stock is undervalued, which may also be a consideration here.

Brighthouse Financial has seen its share price climb 6% over the past year, even with some volatility. Short-term momentum has softened, with the stock slipping nearly 21% over the past three months, which contrasts with a modest gain earlier in the year. This cooling off comes after a period of heightened activity, including the close of its $335 million buyback and a new round of preferred dividend announcements. Both of these factors have likely influenced how investors are weighing risk and potential for future growth.

With improved profitability and steady capital returns on one side and recent price weakness on the other, some investors may be considering whether Brighthouse Financial is trading at a bargain or if the market is simply recalibrating expectations for the future.

Most Popular Narrative: 18% Undervalued

According to community narrative, Brighthouse Financial is currently undervalued by 18% relative to its fair value, based on a detailed analysis of expected growth and industry positioning. The discounted fair value estimate applies a discount rate consistent with recent industry norms.

"The company's growing involvement with innovative retirement income products, such as BlackRock's LifePath Paycheck, is opening up new distribution channels via the workplace and allowing Brighthouse to reach broader customer segments. This is expected to drive higher premium growth and diversify top-line revenue."

Curious why analysts are betting big on Brighthouse? One often overlooked factor about its growth story could surprise you. There are specific and aggressive assumptions about its future that might influence your view on what makes the company stand out. Interested in what’s supporting this ambitious valuation? Take a closer look at the analyst consensus to see which projections contribute most significantly.

Result: Fair Value of $56.22 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, ongoing losses and exposure to volatile market-driven products could undermine Brighthouse's long-term earnings stability and create uncertainty around its future growth outlook.

Find out about the key risks to this Brighthouse Financial narrative.

Another View: What Does Our DCF Model Say?

Switching gears, our DCF model provides a different perspective on Brighthouse Financial’s value. This approach considers future cash flows and presents a view that is even more optimistic than market consensus. What might the market be missing?

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 Brighthouse Financial 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 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 Brighthouse Financial Narrative

If you're not completely convinced by these perspectives or want to investigate the financials firsthand, you can craft your own view of Brighthouse Financial in just a few minutes. do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Brighthouse Financial.

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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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