Has the 34% 2025 Rally Left Lincoln National Stock Still Attractively Priced?
- Wondering if Lincoln National at around $42.74 is a bargain or a value trap? You are not alone, and we are going to unpack exactly what the market might be missing.
- The stock has climbed 3.9% over the last week and month, and it is now up 34.2% year to date and 31.3% over the past year, which signals that investor sentiment and expectations have shifted meaningfully.
- Recently, headlines have focused on Lincoln National's ongoing balance sheet repositioning and strategic initiatives to simplify its business mix. These are moves that investors often view as catalysts for rerating large insurers. At the same time, analysts have been reassessing risk in the life insurance space more broadly, which helps explain why the shares have recovered 62.5% over 3 years, despite only a modest 6.4% gain over 5 years.
- Even after that rebound, our framework suggests Lincoln National scores a solid 5/6 on valuation checks, hinting that the market may still be underestimating its intrinsic value. Next, we will walk through the main valuation approaches investors use, then finish with a more nuanced way to think about what Lincoln National is really worth.
Approach 1: Lincoln National Excess Returns Analysis
The Excess Returns model looks at how much value a company can create above the return that equity investors require, using its existing and future capital base. Instead of focusing on cash flows, it examines whether management can earn attractive returns on the shareholder equity already on the balance sheet.
For Lincoln National, the starting point is a Book Value of $49.84 per share and a Stable Book Value forecast of $54.68 per share, based on estimates from 5 analysts. Those same analysts imply a Stable EPS of $5.95 per share and an Average Return on Equity of 10.88%. With a Cost of Equity of $3.80 per share, the model calculates an Excess Return of $2.15 per share. This suggests that Lincoln National is expected to earn comfortably more than its equity cost on a sustained basis.
When these excess returns are projected forward and discounted, the model arrives at an intrinsic value of about $112.76 per share. This implies the stock is roughly 62.1% undervalued versus the current price around $42.74.
Result: UNDERVALUED
Our Excess Returns analysis suggests Lincoln National is undervalued by 62.1%. Track this in your watchlist or portfolio, or discover 908 more undervalued stocks based on cash flows.
Approach 2: Lincoln National Price vs Earnings
For profitable companies like Lincoln National, the price to earnings ratio is a practical way to gauge how much investors are willing to pay today for each dollar of current earnings. In general, faster growth and lower perceived risk justify a higher PE, while slower growth or higher uncertainty tend to pull a normal or fair PE lower.
Lincoln National currently trades on a PE of about 4.0x, which is well below both the Insurance industry average of roughly 12.8x and the broader peer average of around 9.6x. Simply Wall St takes this further with a proprietary Fair Ratio, which estimates what PE you might reasonably expect given Lincoln National's earnings growth profile, margins, risk factors, industry and market cap. For Lincoln National, that Fair Ratio is 12.8x, implying a materially higher multiple than the market is currently assigning.
Because the Fair Ratio incorporates growth, risk and profitability, it provides a more tailored benchmark than a simple comparison with peers or the sector. Comparing the current 4.0x PE with the 12.8x Fair Ratio suggests the market is still pricing the stock at a steep discount.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Lincoln National Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. This is a simple framework on Simply Wall St's Community page that lets you tell a clear story about Lincoln National, link that story to your own forecast for its future revenue, earnings and margins, and then translate those assumptions into a Fair Value you can compare with today’s price. You can then decide whether to buy, hold or sell, while the platform dynamically refreshes your Narrative as new news or earnings arrive. One investor might build a bullish Lincoln National Narrative around sustained sector tailwinds, rising margins and a Fair Value of about $52 per share. Another might craft a more cautious Narrative that assumes slower growth, lingering legacy risks and a Fair Value closer to $37, with both perspectives coexisting and evolving as the facts change.
Do you think there's more to the story for Lincoln National? 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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