A Look at Everest Group’s Valuation After Third-Quarter Miss and Major Business Reshuffle

Everest Group (NYSE:EG) is in focus after releasing third-quarter results that missed analyst estimates. The results were affected by challenging underwriting conditions and reserve charges in its retail commercial insurance segment. Shares fell nearly 10% following the update.

See our latest analysis for Everest Group.

This sharp drop comes after a series of significant changes at Everest Group, including the sale of its retail commercial insurance book and a $1.2 billion reinsurance deal to limit legacy risks. The stock's recent momentum has faded, with a 30-day share price return of -11.03% and a year-to-date decline of -13.43%. While the 1-year total shareholder return stands at -8.35%, Everest's long-term track record remains respectable. Over the past five years, the total return is 66.44%.

If the volatility around Everest has you scanning for fresh opportunities, this could be the right moment to broaden your search and discover fast growing stocks with high insider ownership

With the stock now trading well below its average analyst price target, investors are left to ponder whether Everest Group is undervalued after these setbacks or if the market is already accounting for all the risks and future growth ahead.

Most Popular Narrative: 19.5% Undervalued

The most widely followed narrative values Everest Group shares at $390.87, well above the last close of $314.52. This gap sets the stage for a closer look at what is driving such a high conviction valuation.

Everest Group continues to see strong growth opportunities from the rising frequency and severity of natural catastrophes. This is driving sustained high demand and robust pricing for property catastrophe reinsurance. The company is strategically increasing its exposure in well-priced cat programs with returns well above cost of capital, supporting future revenue and net margin expansion.

Read the complete narrative.

Want to know what powers this bullish outlook? The core of this narrative hinges on Everest's exposure to surging catastrophe risk and bold expectations for future profitability. The big surprise is just how much analysts believe earnings and margins could shift in the next few years. Click through to see the numbers that shape this fair value estimate.

Result: Fair Value of $390.87 (UNDERVALUED)

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

However, rising catastrophe exposure and persistent expense pressures could undercut Everest Group’s profitability if industry conditions worsen or costs remain elevated.

Find out about the key risks to this Everest Group narrative.

Another View: Market Ratios Paint a Different Picture

While some see Everest Group as undervalued based on future earnings potential, the current market price-to-earnings ratio tells a more cautious story. At 24.6x, Everest trades well above both its peer average of 13.4x and the broader US insurance industry at 13.2x. This steep premium raises the bar for performance and suggests investors may face greater downside risk if lofty expectations are not met. The fair ratio at 39.2x remains far above sector norms, prompting the question: does the stock warrant such high confidence when compared head-to-head with its rivals?

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

Build Your Own Everest Group Narrative

If you think the current story misses something or would rather dig into the numbers yourself, you can build your own Everest Group narrative in just a few minutes, then Do it your way

A great starting point for your Everest Group research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

Smart investors know the next big opportunity is always around the corner. Don’t let valuable trends slip past you. Let Simply Wall Street’s screeners put you ahead.

• Supercharge your watchlist by targeting high-yield income plays among these 22 dividend stocks with yields > 3% offering consistent returns above 3% for reliable cash flow.
• Capture growth potential as you browse these 26 AI penny stocks at the forefront of artificial intelligence innovation, reshaping industries and opening fresh investment frontiers.
• Position yourself for strong gains by hunting these 832 undervalued stocks based on cash flows that the market may be overlooking, setting the stage for impressive long-term upside.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com