Genworth Financial (GNW): Assessing Valuation After Strong Earnings and Buyback Completion

Genworth Financial (GNW) just posted third quarter results that showed both revenue and net income increased compared to last year. The company also completed a large share buyback program, which may catch the attention of investors.

See our latest analysis for Genworth Financial.

Genworth Financial's steady year-to-date share price return of 22.21% suggests momentum is still in investors' favor, especially following the recent earnings beat and the completion of a major buyback program. The company's 16.05% total shareholder return over the past year highlights its ongoing ability to reward shareholders in both the short and long term.

If you're looking for more opportunities beyond Genworth's recent moves, this could be a great moment to broaden your search and discover fast growing stocks with high insider ownership.

With shares trading below analyst price targets and the company recently topping earnings estimates, investors may be wondering if Genworth Financial is still undervalued or if the market has already priced in its future growth prospects.

Price-to-Earnings of 13.9x: Is it justified?

Genworth Financial's price-to-earnings (P/E) ratio of 13.9x sits notably below the broader US market average P/E of 18.2x, signaling a valuation that is modest by comparison. Despite this, shares are currently trading above the valuation estimate provided by the SWS DCF model but below some analyst price targets, keeping its valuation debate firmly in focus.

The P/E ratio is a commonly used metric that compares a company's share price to its earnings per share. For insurance companies like Genworth, it helps investors gauge how the market values each dollar of current earnings relative to other insurers and the market as a whole.

This multiple may seem reasonable at first glance, but when compared to industry peers, Genworth appears expensive. Its P/E ratio not only exceeds the US Insurance industry average of 13.4x but also stands well above the peer average of 7.7x. While this could mean the market expects stronger performance ahead, it also might suggest the shares are priced for perfection without ample supporting evidence from recent profit trends.

Insufficient data makes it challenging to determine a "fair" P/E ratio for Genworth right now, leaving investors without a clear benchmark for what the market could move toward.

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

Result: Price-to-Earnings of 13.9x (OVERVALUED)

However, softer recent returns and a persistent valuation premium over peers could dampen further upside if earnings momentum stalls or if market sentiment shifts.

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

Another View: What About Discounted Cash Flow?

While the current valuation debate focuses on price-to-earnings, the SWS DCF model offers a very different perspective for Genworth Financial. This approach estimates the company’s fair value based on its future expected cash flows. According to the model, shares currently trade above where the DCF suggests they should be, raising questions about whether earnings alone tell the full story. Is the market too optimistic, or could cash flow prospects surprise us?

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 Genworth 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 884 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 Genworth Financial Narrative

If your perspective differs from the above or you prefer digging into the numbers directly, you can shape your own analysis in just a few minutes, and Do it your way.

A great starting point for your Genworth Financial 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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