Is There Opportunity in Chubb Shares After Recent 5% Drop?

Deciding what to do with Chubb stock right now puts you in good company. With a consistently strong track record and a business that rides the evolving tides of risk, Chubb’s recent price movements have certainly caught investors’ attention. The last five years have delivered impressive growth, as the stock is up 125.0% in that period, but more recently, the ride hasn’t been as smooth. Over the past year, shares are down 9.9%, with a slide of 5.2% just in the last week, as broader market jitters and changing risk appetites have pulled financial stocks in new directions.

Some investors are stepping back, reassessing their positions after a long bull run, while others are seeing a setup for opportunity, especially for high-quality insurers like Chubb. Despite shorter-term volatility, Chubb’s valuation stands out: our score gives the company a 4 out of 6 on undervaluation checks. That means Chubb meets most, but not quite all, of the marks that make a stock look compelling on a traditional value basis.

Understanding where Chubb stands from a valuation perspective can help clarify if the recent pullback looks like a bargain or a warning sign. Let’s break down the key methods analysts use to gauge value. There is also a smarter, more forward-looking way to think about what the stock is really worth, which we’ll cover at the end of this article.

Why Chubb is lagging behind its peers

Approach 1: Chubb Excess Returns Analysis

The Excess Returns model evaluates a company based on how much profit it generates beyond the cost of capital invested by shareholders. In other words, it looks at Chubb’s ability to deliver returns greater than what investors could expect elsewhere, while factoring in future growth and profitability expectations.

For Chubb, the model uses a Book Value of $174.07 per share and forecasts a stable Earnings per Share (EPS) of $26.51, based on blended return estimates from 10 analysts. With a calculated Cost of Equity of $13.33 per share, Chubb’s Excess Return is $13.18 per share, reflecting its consistent outperformance. The firm’s Average Return on Equity is projected at 12.82%, and Stable Book Value is anticipated to rise to $206.69 per share, according to the consensus from 12 analysts.

Based on these factors, the Excess Returns model produces an estimated intrinsic value for Chubb of $597.98 per share. This figure is 55.1% above the current market price, signaling that the stock is distinctly undervalued.

Result: UNDERVALUED

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

Our Excess Returns analysis suggests Chubb is undervalued by 55.1%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Chubb Price vs Earnings

For profitable companies such as Chubb, the Price-to-Earnings (PE) ratio is a widely used and suitable valuation metric. The PE ratio helps investors quickly gauge how much they are paying for each dollar of earnings, making it especially relevant for established firms with consistent profit streams.

The "right" or "fair" PE ratio for a stock usually depends on expectations for future earnings growth and the risks specific to that business or sector. Companies expected to grow faster or with steadier profits typically command a higher PE, while higher risk or slowing growth tends to hold the ratio back.

Chubb currently trades at 11.63x earnings, which is just above the average of its direct peers at 10.57x and a bit below the insurance industry average of 13.18x. However, Simply Wall St's proprietary Fair Ratio for Chubb stands at 14.56x, reflecting an earnings multiple tailored to the company’s future growth prospects, risks, profit margin, industry, and market cap.

The Fair Ratio is more meaningful than blunt comparisons to peers or industry averages, since it weighs Chubb’s unique business profile and the specific factors that shape its outlook. Relative to this bespoke benchmark, Chubb’s current PE is well below its Fair Ratio. This suggests the shares are undervalued on this basis.

Result: UNDERVALUED

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

Upgrade Your Decision Making: Choose your Chubb 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 own, investable story about a company. It connects your beliefs about Chubb’s business outlook, risks, and future performance directly to a forecast for revenue, earnings, margins, and ultimately, your estimate of fair value. Unlike static ratios or models, Narratives show how your perspective shapes what you think the stock is worth, and make it easy to see how your assumptions compare to the community’s on Simply Wall St’s platform (just visit the Community page to try it out).

Narratives help you decide whether to buy or sell by clearly comparing your calculated Fair Value to the current market price. Because they update dynamically every time new news or fresh results are reported, your view always reflects the latest data. For example, among all Chubb Narratives shared by investors, the highest fair value comes from bullish forecasts expecting substantial profit margin increases and a future PE ratio of 14.37x (fair value $340.00 per share), while the lowest comes from a more cautious outlook on revenue growth and margin risk (fair value $267.00). Narratives put you, instead of the market, at the center of your investing decisions.

For Chubb, we have made it easy for you with previews of two leading Chubb Narratives:

• 🐂 Chubb Bull Case

  Fair Value: $303.50

  Currently Undervalued by: 11.6%

  Expected Revenue Growth Rate: -5.1%

  • Growth is attributed to international expansion, digital innovation, and disciplined underwriting; higher profit margins are expected.
  • Share buybacks and a strong capital position support flexible shareholder returns, even though analyst price target upside is modest.
  • Risks include competition in large commercial accounts, increasing catastrophe costs, and margin pressure from regulatory and economic challenges.
• 🐻 Chubb Bear Case

  Fair Value: $247.08

  Currently Overvalued by: 8.6%

  Expected Revenue Growth Rate: 2.6%

  • Considers Chubb’s exposure to high competition, regulatory barriers, and risks from alternative risk management solutions.
  • Highlights challenges from low industry growth rates, operational complexity, and market disruptions that could limit upside potential.
  • Target buy price is set below the current market level given heightened risks and modest long-term growth outlook.

Do you think there's more to the story for Chubb? Create your own Narrative to let the Community know!

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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