Is Old Republic International a Bargain After 106.8% Three Year Surge?

If you are trying to decide what to do with Old Republic International stock right now, you are far from alone. After turning in a stellar 270% gain over the last five years, this insurance giant has certainly caught the market’s attention; yet its short-term movements have been notably muted. Over the past week, the stock slipped by a modest 0.4%, and over the last month it has dipped just 0.9%. Still, if you zoom out, the growth is impressive: shares are up 13.0% year to date, with a solid 27.2% jump over the past twelve months, and an eye-popping 106.8% return over three years.

What is driving these numbers? Apart from the macro backdrop of the insurance industry remaining resilient, Old Republic has been making headlines for its focus on expanding specialty insurance offerings and reinforcing its dividend commitment. Both factors help reinforce steady confidence from investors. This sets an interesting stage for discussing valuation. By the standard metrics, Old Republic scores a robust 5 out of 6 on the classic value scale. This means it checks nearly every box for being undervalued.

Now, the real question is: does a strong value score tell the whole story, or is there more to uncover beneath the surface? Next, we will dig into which valuation checks Old Republic passes, where it misses, and why different approaches may matter. Stick around, because at the end of the article, we will look at a smarter way to assess whether the stock truly deserves a place in your portfolio.

Old Republic International delivered 27.2% returns over the last year. See how this stacks up to the rest of the Insurance industry.

Approach 1: Old Republic International Excess Returns Analysis

The Excess Returns valuation model is designed to evaluate how efficiently a company can generate profits over and above the cost of its equity capital. Instead of just relying on accounting profit or growth rates, this model zeros in on the real value a business adds for shareholders when its return on equity consistently beats the hurdle rate, or cost of capital, it faces.

For Old Republic International, the latest numbers are encouraging. The company's average return on equity sits at 12.67%, while its cost of equity is just $1.78 per share. That results in an excess return of $1.55 per share, powered by a stable earnings per share of $3.33 (based on the median return over the past five years). The book value per share stands at $25.27, and analysts estimate the stable book value will grow to $26.31 in the near future.

From this model, the estimated intrinsic value of the stock is $68.29 per share. When compared to the current share price, this implies Old Republic International is undervalued by roughly 40.4%, a significant margin that cannot be ignored by value-focused investors.

Result: UNDERVALUED

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

Our Excess Returns analysis suggests Old Republic International is undervalued by 40.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Old Republic International Price vs Earnings

The price-to-earnings (PE) ratio is one of the most widely used metrics for valuing profitable companies with consistent earnings. This makes it a suitable measure for assessing Old Republic International. It shows how much investors are willing to pay for each dollar of the company’s earnings, helping to gauge market sentiment and relative value.

When determining what is considered a “fair” or “normal” PE ratio, it is important to remember that expectations for future earnings growth and a company’s risk profile play major roles. Higher growth prospects and lower risk generally justify a higher PE multiple, while slower growth or higher risk might result in a lower one.

Old Republic’s current PE ratio stands at 11.1x. This is noticeably below the insurance industry average of 13.9x and also lags the broader peer average of 14.5x. However, straightforward comparisons like these can overlook important nuances, such as company size, profit margins, or risk factors specific to Old Republic’s business model.

This is where Simply Wall St’s proprietary “Fair Ratio” comes into play. The Fair Ratio, which in this case is 11.7x, considers factors like Old Republic’s expected earnings growth, industry trends, profit margins, and overall risk profile. Unlike simple peer or industry comparisons, the Fair Ratio offers a more tailored benchmark that reflects the company’s unique circumstances and outlook.

Comparing Old Republic’s actual PE ratio to its Fair Ratio shows only a slight difference of 0.6x. This suggests the stock is trading very close to its fair value on this metric, indicating a balanced market view of the company’s risk and return profile.

Result: ABOUT RIGHT

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 Old Republic International Narrative

Earlier, we mentioned an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is a simple, practical tool that lets you tell the story behind the numbers, expressing your perspective on a company’s future, such as your own assumptions for Old Republic International’s fair value, expected revenue, earnings, and profit margins.

Instead of relying only on static metrics, Narratives help you connect the company's story, what you believe about its business trends and risks, to a concrete set of forecasts and then to a fair value estimate, all in one easy step. Narratives are accessible right on Simply Wall St’s Community page, where millions of investors share and compare their views.

By building or following Narratives, you can quickly see if your fair value is higher or lower than the current share price, making it easier to spot opportunities to buy or sell. Best of all, Narratives automatically update as soon as news breaks or new company results come in, so your analysis stays current.

For example, some investors project Old Republic International’s fair value as high as $47, based on growth and capital strength, while others are more cautious and value it closer to $42 amid real estate headwinds. This demonstrates how Narratives help capture a full range of investor perspectives and give you a smarter, more dynamic approach to making decisions.

Do you think there's more to the story for Old Republic International? 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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