Is It Too Late To Consider Old Republic International (ORI) After Its Strong Five Year Run

• If you are wondering whether Old Republic International is still good value after its long run, you are not alone. This article walks through what the current share price might be pricing in.
• The stock closed at US$41.70, with recent returns of a 1.5% decline over 7 days, a 3.1% decline over 30 days, a 3.6% decline year to date, but a 24% gain over 1 year and a very large 5 year return of about 3x.
• These moves sit against a backdrop of ongoing interest in Old Republic International as a long term insurance and risk management player. Investors are watching how its underwriting and investment activities shape expectations. Recent coverage has focused on how insurers like Old Republic balance pricing, claims experience, and capital strength, which all feed into how the market views its shares.
• Simply Wall St currently gives Old Republic International a valuation score of 4 out of 6, suggesting several checks point to the shares looking inexpensive. Next we will walk through the standard valuation approaches used before coming back to a more complete way of thinking about what the stock might be worth.

Old Republic International delivered 24.0% returns over the last year. See how this stacks up to the rest of the Insurance industry.

Approach 1: Old Republic International Excess Returns Analysis

The Excess Returns model looks at how effectively Old Republic International uses shareholders’ equity, then compares that to the return investors are asking for. Instead of focusing on cash flows, it asks whether each dollar of equity is expected to earn more than the required return over time.

For Old Republic International, book value is $24.08 per share, with a stable earnings per share estimate of $3.18, based on the median return on equity from the past 5 years. The average return on equity is 12.67%, while the cost of equity is calculated at $1.75 per share. That leaves an excess return of $1.43 per share, which is what this model treats as the economic value created above investors’ required return.

The stable book value is estimated at $25.07 per share, based on weighted future book value estimates from 2 analysts. Feeding these inputs into the Excess Returns framework produces an intrinsic value estimate of about $65.07 per share. Compared with the current share price of $41.70, this implies the stock is 35.9% undervalued on this model.

Result: UNDERVALUED

Our Excess Returns analysis suggests Old Republic International is undervalued by 35.9%. Track this in your watchlist or portfolio, or discover 53 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Old Republic International.

Approach 2: Old Republic International Price vs Earnings

For a profitable company like Old Republic International, the P/E ratio is a useful way to relate what you pay per share to the earnings the business is generating. It gives you a quick sense of how many dollars investors are currently willing to pay for each dollar of earnings.

What counts as a “normal” P/E depends on how the market views a company’s growth prospects and risks. Higher expected growth and lower perceived risk tend to support higher P/E levels, while slower growth or higher risk usually point to lower ratios. Old Republic International currently trades on a P/E of 10.85x. That sits close to the peer average of 10.97x and below the broader Insurance industry average of 12.48x.

Simply Wall St’s “Fair Ratio” for Old Republic International is 10.51x. This is a proprietary estimate of the P/E you might expect once factors like earnings growth, industry, profit margin, market cap and risk profile are taken into account. Because it blends these company specific inputs, it can be more tailored than a simple comparison with peers or the overall industry. Against this Fair Ratio, the current P/E of 10.85x comes out slightly higher, suggesting the shares look mildly overvalued on this metric.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Old Republic International Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple tool on Simply Wall St’s Community page. Here you describe your story for Old Republic International and connect it to your own revenue, earnings and margin assumptions. These then roll into a forecast and a fair value that you can compare with the current share price to help you decide whether the stock looks attractive or stretched. The Narrative updates automatically when new data such as earnings or news is added. For example, one investor might build a more optimistic Old Republic International view around the US$42.50 fair value, 6.56% revenue growth, 7.28% margin and 15.96x future P/E, while another might plug in more cautious numbers. Both can quickly see how their different stories translate into different fair values and choices about when to act.

Do you think there's more to the story for Old Republic International? 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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