• Investors may be wondering whether Unum Group at around US$84.52 is still a sensible entry or add, or if most of the easy value is already reflected in the price.
• The stock has returned 3.5% over the past week, 9.1% over the last month, 9.4% year to date and 8.4% over the past year, with a 3 year return of 101.1% and a 5 year return of 219.0%.
• Recent coverage has focused on Unum Group as a US insurance stock that continues to attract attention from investors following its long term share price performance and role in the benefits space. This context helps explain why shorter term moves can trigger renewed debate about whether the stock is priced attractively or has become more fully valued.
• On Simply Wall St's valuation checks, Unum Group scores 2 out of 6. The next step is to look at how different valuation methods assess the stock today and then finish with a broader way of thinking about value that goes beyond a single score.

Unum Group scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Unum Group Excess Returns Analysis

The Excess Returns model looks at how much profit a company is expected to earn over and above the return that investors require on its equity, then converts those “excess” profits into a per share value today.

For Unum Group, the model uses a Book Value of $67.76 per share and a Stable EPS estimate of $8.70 per share, based on weighted future Return on Equity estimates from 4 analysts. The average Return on Equity used in the model is 11.06%, while the implied Cost of Equity is $5.59 per share. That leaves an Excess Return of $3.11 per share, which is what the company is expected to earn over the required return.

The analysis also incorporates a Stable Book Value of $78.60 per share, sourced from weighted future Book Value estimates from 7 analysts. Putting these inputs together, the Excess Returns model arrives at an intrinsic value of about $165.75 per share. At a recent share price of about $84.52, this suggests the stock is 49.0% undervalued based on this method.

Result: UNDERVALUED

Our Excess Returns analysis suggests Unum Group is undervalued by 49.0%. Track this in your watchlist or portfolio, or discover 49 more high quality undervalued stocks.

Approach 2: Unum Group Price vs Earnings

For a profitable company like Unum Group, the P/E ratio is a useful way to think about what you are paying for each dollar of earnings. It ties the share price directly to the earnings that support it, which is often how investors compare established, income generating businesses.

What counts as a “normal” or “fair” P/E depends on what the market expects for future growth and how risky those earnings are seen to be. Higher expected growth or lower perceived risk can justify a higher P/E, while lower growth or higher risk usually points to a lower P/E.

Unum Group currently trades on a P/E of 17.28x. That is slightly above the peer average of 16.81x and above the Insurance industry average of 11.29x. Simply Wall St’s Fair Ratio for Unum Group is 15.23x, which is its proprietary estimate of what a reasonable P/E might be given factors like earnings growth, profit margin, market cap, risk profile and industry. This Fair Ratio can be more tailored than a simple peer or industry comparison because it adjusts for these company specific features. Compared with the current P/E of 17.28x, the Fair Ratio of 15.23x suggests the stock is trading on a richer multiple than expected.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Unum Group Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives are Simply Wall St's way of letting you attach a clear story about Unum Group to your numbers, link that story to a forecast for revenue, earnings and margins, and then to a Fair Value that you can compare with the current price to decide whether to act. Each Narrative lives on the Community page, updates automatically when fresh news or earnings arrive, and can look very different from one investor to the next. For example, one user might build a bullish Unum Group Narrative around higher margins, share repurchases and a Fair Value near the top analyst target of US$113. Another might focus on long term care risks, flat sales and sector pressure and land closer to the lowest target of US$80.

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.