Assessing ProAssurance’s Valuation After a Strong Multi-Year Share Price Rerating

ProAssurance (PRA) has quietly delivered a strong run for patient investors, with shares up roughly 53% year to date and about 44% over the past year, despite modest revenue contraction.

See our latest analysis for ProAssurance.

The latest leg of the rally has been more of a steady grind than a spike. The 90 day share price return of 1.26% has consolidated earlier gains as investors reprice ProAssurance for improving profitability, while its five year total shareholder return of 34.97% points to quietly compounding value rather than a one off pop.

If this kind of steady rerating has you curious about what else might be setting up for a similar move, it is a good time to explore healthcare stocks for fresh ideas in the space.

With shares hovering just below analyst targets after a powerful rerating, the key question now is whether ProAssurance remains mispriced on its improving earnings profile, or if the market has already fully baked in the next leg of growth?

Most Popular Narrative: 6.3% Overvalued

With ProAssurance last closing at $24.10 against a narrative fair value of about $22.67, expectations lean ahead of the suggested fundamentals.

Analysts are assuming ProAssurance's revenue will decrease by 2.5% annually over the next 3 years. Analysts assume that profit margins will increase from 4.3% today to 7.0% in 3 years time.

Read the complete narrative.

Want to see why shrinking revenues still support a premium valuation multiple? The narrative leans on powerful margin gains and ambitious earnings targets. Curious what that profit roadmap actually looks like?

Result: Fair Value of $22.67 (OVERVALUED)

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

However, social inflation in legal claims and intensified pricing competition could quickly erode margins and challenge the case for sustaining a premium valuation.

Find out about the key risks to this ProAssurance narrative.

Build Your Own ProAssurance Narrative

If you see the story differently or would rather dig into the numbers yourself, you can shape a fresh view in just minutes, Do it your way.

A great starting point for your ProAssurance research is our analysis highlighting 1 key reward and 1 important warning sign 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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