Unum Group (UNM): Examining Valuation After Strong Financial Ratings Reaffirmed by AM Best

Unum Group (UNM) is back in the spotlight after AM Best reaffirmed its strong financial ratings and stable outlook. The rating agency cited Unum’s healthy balance sheet, consistent operating results, and thorough risk management practices. The agency also mentioned that they will continue to monitor reserve levels in the company’s long-term care division. For investors, this update brings a sense of confidence in Unum’s financial position, even as questions around the long-term care segment remain in the background. Against this backdrop, Unum’s stock has gained momentum. The share price has climbed nearly 37% over the past year, with some extra lift in the past month. The stock’s three- and five-year total returns also stand out. While recent results show steady growth in both revenue and net income, a recent miss on book value per share and EPS has given some investors pause. Combined with ongoing technology investments and risk management initiatives, the picture is a blend of progress and lingering caution. With all of these factors in play, the next big question is clear: Is Unum’s valuation offering a real buying opportunity here, or is the market already pricing in its future growth?

Most Popular Narrative: 15.9% Undervalued

According to the most widely followed narrative, Unum Group appears undervalued by nearly 16% when compared to its estimated fair value. This judgment is built on a detailed set of assumptions around the company’s future growth prospects and financial trajectory.

“Unum’s ongoing investment in digital capabilities, exemplified by integration of platforms like HR Connect and recent tech acquisitions, has boosted customer persistency and improved client retention, supporting stable premium growth and expanding net margins over time.”

Want to know the secret behind this impressive discount? Analysts have built their fair value on bold assumptions about Unum’s future, from double-digit earnings projections to an earnings multiple you won’t expect. Curious how these factors combine for a valuation that could make or break your next move? The foundation of this price target may surprise you.

Result: Fair Value of $93.08 (UNDERVALUED)

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

However, persistent pressure on benefit ratios or renewed issues in the long-term care block could quickly undermine the case for Unum’s current valuation.

Find out about the key risks to this Unum Group narrative.

Another View: What Does the SWS DCF Model Say?

While some see Unum trading at a significant discount based on earnings, our DCF model tells a story of even greater undervaluation by using forecasted cash flows. Could the bigger opportunity lie with this perspective?

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 Unum Group 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 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 Unum Group Narrative

If you see the numbers differently or you’re someone who digs into the data on your own terms, crafting your own view takes less than three minutes. Do it your way

A good starting point is our analysis highlighting 5 key rewards investors are optimistic about regarding Unum Group.

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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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