Fairfax Financial Holdings (TSX:FFH): Revisiting Valuation After Eurolife Sale and S&P Index Inclusions

Fairfax Financial Holdings (TSX:FFH) just checked three big boxes for investors, selling its 80% Eurolife stake for a sizable gain while also joining the S&P International 700 and S&P Global 1200 indices.

See our latest analysis for Fairfax Financial Holdings.

Those index additions and the Eurolife deal come on top of a strong run, with Fairfax’s 12.25% 1 month share price return and hefty 5 year total shareholder return of 512.59% signaling solid, still building momentum.

If Fairfax’s trajectory has you rethinking your watchlist, this is a good moment to broaden your search and discover fast growing stocks with high insider ownership.

But after such outsized long term returns, a fresh index tailwind and a lucrative Eurolife exit, is Fairfax still trading below its intrinsic value or are markets already pricing in the next leg of its growth?

Most Popular Narrative Narrative: 3.8% Undervalued

With Fairfax Financial Holdings last closing at CA$2,605.84 against a narrative fair value near CA$2,708, the story centers on whether today’s earnings power is temporary or durable.

The market may be overestimating the sustainability of Fairfax's elevated net investment income, as current results are heavily boosted by high interest rates and strong gains on fixed income portfolios. If global rates moderate or decline, this tailwind could reverse, materially lowering net earnings.

Read the complete narrative.

Want to see what keeps this valuation above today’s price, even with falling earnings baked in, slower growth, and a richer future earnings multiple? Dig into the full narrative to uncover the projections behind that call.

Result: Fair Value of $2707.92 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, if investment income stays structurally higher and underwriting performance remains strong, Fairfax’s earnings could outpace current expectations and support a higher valuation.

Find out about the key risks to this Fairfax Financial Holdings narrative.

Build Your Own Fairfax Financial Holdings Narrative

If this view does not quite fit your own, or you would rather lean on your own analysis, you can quickly build a custom thesis in under three minutes using Do it your way.

A great starting point for your Fairfax Financial Holdings research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

Ready for your next investing move?

Do not stop at just one great company. Use the Simply Wall Street Screener today to spot fresh opportunities before the crowd locks them up.

• Capitalize on mispriced potential by targeting these 875 undervalued stocks based on cash flows where strong cash flows are not yet fully reflected in market prices.
• Ride powerful technology trends early by backing these 25 AI penny stocks positioned at the heart of intelligent automation and data driven disruption.
• Strengthen your income stream with these 14 dividend stocks with yields > 3% offering reliable yields above 3% supported by real, underlying cash generation.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com