Is There Room for Growth in MetLife After Its Five-Year 149% Rally?

Are you wondering whether to stick with your MetLife shares, make your first buy, or take some well-earned profits? You are not alone. MetLife’s stock has seen a quiet yet steady climb, prompting both seasoned investors and newcomers to consider its next moves. Over the past week, shares in MetLife nudged up by 0.5%, but that is just a slice of a much bigger story; in the last five years, the stock is up nearly 149%. This long-term momentum suggests more than just short-term sentiment shifting. It hints at fundamental forces at play, possibly changing how investors judge both risk and growth for MetLife in today’s market.

After a stretch of uncertainty from broader market swings and shifting interest rate expectations, MetLife is back in focus for many looking to balance stability and upside. The company is now trading at $82.75, reflecting a fresh sense of confidence as capital flows toward insurance and financial stocks. Valuation-wise, MetLife scores a robust 5 out of 6 on our undervaluation checklist, meaning it passes nearly every traditional test for an attractive price. But are these standard metrics telling the whole story, or is there a smarter way to size up MetLife’s real value? Let’s break down the popular valuation approaches, and stick around for a less conventional but potentially more powerful method later in the article.

Why MetLife is lagging behind its peers

Approach 1: MetLife Excess Returns Analysis

The Excess Returns Model offers a clear lens into what happens when a business earns more on its equity than what it costs to raise that capital. Here, the focus is on how efficiently MetLife puts its money to work for shareholders, measuring the value created over and above its cost of equity.

Current analysis pegs MetLife’s book value at $41.52 per share, with a projected stable book value of $43.74 per share according to estimates from five analysts. The stable earnings per share (EPS) figure, derived from consensus of six analyst forecasts, stands at $6.58, while the cost of equity per share is $3.36. That leaves an excess return of $3.22 per share and an average return on equity of 15.05%, a healthy premium over its equity cost, signalling consistently strong profitability.

Based on these calculations, the estimated intrinsic value per share is $113.53. With the stock currently trading at $82.75, MetLife appears to be 27.1% undervalued from an excess returns perspective, giving investors a significant margin of safety.

Result: UNDERVALUED

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

Our Excess Returns analysis suggests MetLife is undervalued by 27.1%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: MetLife Price vs Earnings

For profitable companies like MetLife, the Price-to-Earnings (PE) ratio is often the go-to valuation metric. It gives investors a direct sense of how much they're paying for a company’s current earnings, making it a clear proxy for value, especially when those earnings are robust and consistent.

However, what counts as a "normal" or "fair" PE ratio does not exist in a vacuum. Growth expectations, risk levels, and the stability of earnings all play a big role in determining a reasonable multiple. Higher growth and lower risk typically command a higher PE, while slower growth or higher risk push that number down.

Currently, MetLife trades at a PE ratio of 13.45x. This sits just below the insurance industry average of 14.28x, and is notably less than the broader peer group’s average of 18.13x. On the surface, this suggests some undervaluation, but benchmarks alone do not tell the whole story. That is where Simply Wall St’s “Fair Ratio” comes in. It stands at 16.92x for MetLife. This proprietary figure incorporates much more than just basic sector averages: it factors in MetLife’s growth profile, profit margins, market cap, and unique risk profile, providing a custom-fit expectation for the company’s value.

Since MetLife’s current PE is meaningfully below its Fair Ratio, the shares appear undervalued on this key metric. Investors are effectively paying less than what would be expected given the company’s strengths and prospects.

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 MetLife Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is simply the unique story you believe about a company, which links your view of its business prospects to your estimates for things like revenue, earnings, margins, and ultimately, what you think the share is worth. Instead of just relying on numbers, Narratives help you connect the dots from your analysis and news events to a fair value calculation. This process gives context to your assumptions and forecasts.

Narratives are available to everyone on Simply Wall St’s Community page, giving millions of investors an accessible and practical tool for decision making. They make it easy to see the logic behind buy, hold, or sell signals by comparing each Narrative’s Fair Value to the current share price. Whenever relevant news or new financial results come out, Narratives are automatically updated so your view stays current. For MetLife, some investors may see potential for significant value gains thanks to global expansion and digital transformation, targeting a fair value of $108. Others may take a more cautious view, focusing on industry risks and margin pressures, and land at $72. Narratives empower you to find your own conviction and react with confidence as circumstances evolve.

Do you think there's more to the story for MetLife? 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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