A Look at American Financial Group’s Valuation After 40th Straight Dividend Increase and Strong Earnings

American Financial Group, Inc. just declared a 10% dividend increase, payable later in October, marking its 40th consecutive year of payments. This move, following earnings above expectations, highlights the company’s steady approach and shareholder focus.

See our latest analysis for American Financial Group.

Backing up the dividend news, American Financial Group’s share price has climbed close to 9% year-to-date, while its one-year total shareholder return of around 17% stands out in the insurance sector. Despite broader market headwinds, investor confidence has been building, thanks in part to AFG’s consistent earnings and its ongoing commitment to capital management initiatives.

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With American Financial Group’s shares up nearly 9% this year and its 40th year of dividend increases, investors may wonder if there is still value left on the table or if the market has already priced in the company’s future growth.

Most Popular Narrative: 11% Overvalued

American Financial Group’s narrative fair value lags well behind the current market price, putting a spotlight on whether recent gains reflect stretched optimism among investors.

The ongoing accumulation of wealth among U.S. households is expected to drive greater demand for insurance and annuity products. This positions AFG for continued premium growth and positive impacts on revenue. Advancements in digital transformation and enhanced use of data analytics are supporting more disciplined underwriting and risk management at AFG. These improvements should help increase net margins and operational profitability over the long term.

Read the complete narrative.

Want to see the projections fueling this debate? There is one set of analyst assumptions about revenue decline and profit margin growth that could flip your expectations. Curious which financial levers drive the price target? Read on before you make your next move.

Result: Fair Value of $132.60 (OVERVALUED)

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

However, persistent catastrophe losses or a downturn in key specialty lines could put pressure on American Financial Group’s earnings and challenge the optimism in recent forecasts.

Find out about the key risks to this American Financial Group narrative.

Another View: Deep Value from the SWS DCF Model

While analyst consensus suggests American Financial Group is overvalued compared to its target price, our SWS DCF model provides a completely different perspective. It estimates fair value at $268.48 per share, which is far above the recent trading price. What would it take for the market to catch up with this outlook?

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 American Financial Group 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 American Financial Group Narrative

If you want to take a different angle or put the numbers to the test yourself, you can shape your own story quickly and easily. Do it your way.

A great starting point for your American Financial Group research is our analysis highlighting 2 key rewards 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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