Is It Too Late To Consider Unum Group After Its 320% Five Year Surge?

• Wondering if Unum Group at around $78.69 is still a smart buy after such a big multi year run, or if most of the easy gains are already behind it? You are not alone, and that is exactly what we are going to unpack here.
• The stock has kept grinding higher, up 2.0% over the last week, 4.0% over the past month, 7.9% year to date, 10.6% over 1 year, a hefty 108.2% over 3 years, and an impressive 320.3% over 5 years, signaling that investors have been steadily re rating the story.
• Recent headlines have focused on Unum's role in providing workplace disability, life, and supplemental health benefits at a time when employers are under pressure to upgrade their offerings. This has pushed the company into more investor conversations as a defensive, income oriented name. At the same time, the broader financials and insurance space has been in the spotlight as markets reassess interest rate paths and credit risks, which helps explain why a traditionally steady insurer like Unum has seen renewed buying interest.
• Despite that backdrop, Unum currently scores a 3 out of 6 on our valuation checks, suggesting it looks undervalued on some metrics but not across the board. In the next sections we will break down those different valuation approaches while also pointing to an even better way to think about the company’s true worth by the end of the article.

Unum Group delivered 10.6% returns over the last year. See how this stacks up to the rest of the Insurance industry.

Approach 1: Unum Group Excess Returns Analysis

The Excess Returns model looks at how efficiently Unum Group turns shareholders’ equity into profits above its cost of capital, then capitalizes those surplus returns into an intrinsic value per share.

In this framework, Unum’s Book Value sits at $64.56 per share, while its Stable EPS is estimated at $8.23 per share, based on weighted future Return on Equity forecasts from 5 analysts. With an Average Return on Equity of 11.53% and a Cost of Equity of $4.96 per share, the model calculates an Excess Return of $3.27 per share, indicating the company is expected to generate value above what investors require for the risk they are taking.

The Stable Book Value is projected to grow to $71.37 per share, using estimates from 7 analysts. Feeding these inputs into the Excess Returns framework yields an intrinsic value of roughly $159.78 per share, implying the stock is about 50.8% undervalued versus the current price around $78.69.

Result: UNDERVALUED

Our Excess Returns analysis suggests Unum Group is undervalued by 50.8%. Track this in your watchlist or portfolio, or discover 901 more undervalued stocks based on cash flows.

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

Approach 2: Unum Group Price vs Earnings

For a consistently profitable insurer like Unum Group, the Price to Earnings, or PE, ratio is a useful way to gauge how much investors are willing to pay for each dollar of current earnings. In general, companies with stronger, more reliable growth and lower perceived risk can justify a higher PE, while slower growth or higher uncertainty usually warrants a lower multiple.

Unum currently trades on a PE of around 14.4x, slightly above the broader Insurance industry average of about 13.3x and also above its peer group average of roughly 9.6x. On those simple comparisons, the stock can look a bit expensive. However, Simply Wall St’s Fair Ratio framework goes a step further by estimating what PE Unum should trade on, given its specific earnings growth outlook, profitability, risk profile, industry and market cap. For Unum, that Fair Ratio sits materially higher at about 18.8x, suggesting investors are not yet paying a full price for its fundamentals. With the actual PE below this Fair Ratio, the multiple based view supports the idea that the shares may still offer value.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1458 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Unum Group Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework that lets you attach a clear story to your own assumptions about a company’s future revenue, earnings and margins, and then translate that story into a fair value estimate.

A Narrative on Simply Wall St connects three pieces together: the business story you believe, a set of forward financial forecasts that match that story, and a resulting fair value that you can compare with today’s share price to inform your decision to buy, hold, or sell.

Because Narratives live inside the Community page on Simply Wall St, they are easy to create, share and update. They are automatically refreshed as new information such as earnings releases, guidance changes or major news comes in, so your view of Unum Group remains current.

For example, one Unum Narrative might assume robust digital driven growth and assign a fair value closer to $108 per share, while a more cautious Narrative focused on benefit ratio and long term care risks might land near $79. This gives you a clear range of plausible outcomes to compare with the current price.

Do you think there's more to the story for Unum Group? Head over to our Community to see what others are saying!

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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