• Wondering if Voya Financial at around US$75.29 is offering you good value right now, or if the easy money has already been made?
• The stock has had mixed recent returns, with a 3.5% gain over the last 7 days, a 3.6% decline over 30 days, and returns of 5.2% over 1 year, 4.8% over 3 years, and 47.0% over 5 years.
• Recent company updates, corporate actions, and industry headlines around diversified financials help explain why the share price has moved in different directions over the short and longer term. These developments give useful context before you weigh up what the current price implies about future expectations.
• On our valuation framework, Voya Financial scores a 5 out of 6 for being undervalued across key checks. Next, we look at how different valuation approaches line up on the stock, before finishing with a way to view valuation that goes beyond a single score.

Approach 1: Voya Financial Excess Returns Analysis

The Excess Returns model looks at how effectively Voya Financial turns its equity base into earnings, after accounting for the cost of that equity. In simple terms, it asks whether each dollar of shareholder capital is pulling its weight once the required return for investors is factored in.

For Voya Financial, book value is $52.69 per share and the model uses a stable earnings figure of $7.22 per share, based on the median return on equity from the past 5 years. The implied cost of equity is $4.82 per share, which leaves an excess return of $2.40 per share. That is supported by an average return on equity of 12.14% and a stable book value estimate of $59.48 per share from 7 analysts.

Putting this together, the Excess Returns framework arrives at an intrinsic value of about $110.73 per share. Against the recent share price of roughly $75.29, this implies the stock is about 32.0% undervalued on this model.

Result: UNDERVALUED

Our Excess Returns analysis suggests Voya Financial is undervalued by 32.0%. Track this in your watchlist or portfolio, or discover 51 more high quality undervalued stocks.

Approach 2: Voya Financial Price vs Earnings

For a profitable company like Voya Financial, the P/E ratio is a straightforward way to relate what you pay per share to the earnings generated per share. It helps you see how many dollars investors are currently willing to pay for each dollar of earnings.

What counts as a "normal" or "fair" P/E depends on how the market views a company’s growth prospects and risk. Higher expected growth or lower perceived risk can support a higher P/E, while lower growth or higher risk can point to a lower P/E as being more reasonable.

Voya Financial currently trades on a P/E of about 11.5x. That sits below the Diversified Financial industry average of roughly 15.3x and also below a peer average of about 18.9x. Simply Wall St’s Fair Ratio for Voya Financial is 16.1x, which is its proprietary view of what the P/E could be given factors such as earnings profile, industry, profit margins, size and risk characteristics. This Fair Ratio can be more tailored than a simple comparison with peers or the broad industry, as it is designed to adjust for company specific traits rather than treating all firms as identical. On this basis, Voya Financial’s current 11.5x P/E sits below the 16.1x Fair Ratio, which indicates that the shares may be undervalued on this metric.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Voya Financial Narrative

Earlier we mentioned that there is an even better way to understand valuation, and on Simply Wall St that comes through Narratives. On the Community page, you and other investors can turn your view of Voya Financial into a clear story that links expectations for revenue, earnings, margins and risks to a forecast, a fair value, and a simple comparison with today’s share price. Each Narrative updates automatically as new news or earnings arrive. One investor might build a Narrative around the higher analyst price target of US$90.00 based on confidence in retirement platform expansion and digital tools. Another might anchor on the lower US$64.00 target because they are more cautious about fee compression, medical cost volatility and execution on acquisitions. You can see both side by side, decide which story fits your own assumptions, and use the gap between each Fair Value and the current price of about US$75.52 to guide your timing without having to build a full model yourself.

Do you think there's more to the story for Voya Financial? 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.