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Prudential Financial stock has delivered a 48.6% return over the past five years, and current checks suggest the market price still sits at a discount to its intrinsic value estimate based on the Excess Returns model and earnings multiples.
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A 48.6% five year return points to steady wealth creation, which makes any remaining valuation discount more important to understand.
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PGIM’s move to take full ownership of Deerpath Capital can support Prudential Financial’s fee based earnings potential, while integration and credit cycle risks may still weigh on how investors price that growth.
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On Simply Wall St’s broader valuation checks, Prudential Financial screens as undervalued in 4 of 6 areas, which is a mixed picture rather than an across the board bargain.
The issue now is whether Prudential Financial’s current share price already reflects this mix of long term returns and perceived undervaluation, or if there is still a meaningful discount to intrinsic value left.
Is Prudential Financial Still Cheap on Excess Returns?
The Excess Returns model examines how much value Prudential Financial can create above the return that shareholders require. In this framework, the key inputs are how efficiently the company uses its equity base and how durable those returns can be.
For Prudential Financial, the model uses a Book Value of $92.06 per share and a Stable EPS of $14.40 per share, based on weighted future Return on Equity estimates from 11 analysts. With an Average Return on Equity of 13.60% and a Cost of Equity of $8.47 per share, the excess return comes out at $5.93 per share on a Stable Book Value of $105.87 per share. This supports an intrinsic value estimate of about $238.73 per share, which is well above the current market price and indicates the stock is 48.9% undervalued. Because PGIM is set to acquire the remaining interest in Deerpath Capital, the market may still be cautious on execution and credit risks, which helps explain why the share price remains below this intrinsic value estimate.
On these Excess Returns assumptions, Prudential Financial stock currently screens as clearly undervalued.
Our Excess Returns analysis suggests Prudential Financial is undervalued by 48.9%. Track this in your watchlist or portfolio, or discover 55 more high quality undervalued stocks.
