Never miss an important update on your stock portfolio and cut through the noise. Over 7 million investors trust Simply Wall St to stay informed where it matters for FREE.
-
If you are wondering whether Legal & General Group's current share price actually lines up with its underlying value, you are not alone. This article is built to help you stress test that question clearly.
-
The stock has seen a 6.4% decline over the last 7 days, a 9.2% decline over the last 30 days, and is down 8.0% year to date, while the 1 year and 3 year returns stand at 9.6% and 33.1% respectively, with a 24.0% return over 5 years.
-
Recent coverage around Legal & General often centers on its position as a large, income oriented UK financial group and how market sentiment around interest rates and insurance names can influence shorter term moves. This kind of backdrop helps frame whether the recent pullback is simply sentiment driven or points to a reassessment of long term expectations.
-
On our checks, Legal & General Group currently records a valuation score of 2 out of 6. This means there are some signs of undervaluation but also areas where the price looks more in line with traditional models. Next, we will look at how different valuation approaches assess the shares before finishing with a broader way to think about value that ties everything together.
Legal & General Group scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown .
Approach 1: Legal & General Group Excess Returns Analysis
The Excess Returns model looks at how much profit a company can generate above the return that equity investors typically require, then capitalises those surplus returns into an intrinsic value per share.
For Legal & General Group, the starting point is its book value of £0.32 per share and a stable book value estimate of £0.46 per share, based on weighted future book value estimates from 7 analysts. On this equity base, analysts expect a stable EPS of £0.27 per share, drawn from weighted future return on equity estimates from 8 analysts.
The implied cost of equity in this model is £0.03 per share, while the excess return component is £0.24 per share. That excess, together with an average return on equity of 58.80%, is what drives the model's estimate of intrinsic value. On this basis, the Excess Returns approach points to a fair value of about £6.43 per share.
Compared with the current share price, this suggests Legal & General Group is trading at a 62.4% discount to the model's estimate, which screens as materially undervalued.
Result: UNDERVALUED
Our Excess Returns analysis suggests Legal & General Group is undervalued by 62.4%. Track this in your watchlist or portfolio , or discover 8 more high quality undervalued stocks .
Approach 2: Legal & General Group Price vs Earnings
For a profitable company like Legal & General Group, the P/E ratio is a useful shorthand for how much you are paying for each unit of earnings. It links directly to what matters most for equity holders, which is the cash the business can generate after costs.
What counts as a "normal" or "fair" P/E depends on how quickly earnings are expected to grow and how risky those earnings are. Higher growth or lower perceived risk can justify a higher multiple, while slower growth or higher risk usually points to a lower one.
Legal & General Group currently trades on a P/E of 28.60x, compared with the Insurance industry average of 11.61x and a peer average of 12.98x. Simply Wall St's Fair Ratio for the company is 20.69x, which is its proprietary view of what the P/E "should" be after weighing factors such as earnings growth, profit margins, industry, market cap and specific risks.
This Fair Ratio framework aims to be more tailored than a simple peer or industry comparison, because it adjusts for the company's own profile rather than assuming all insurers deserve the same multiple. Since Legal & General Group's actual P/E of 28.60x sits above the Fair Ratio of 20.69x, the shares look expensive on this metric.
Result: OVERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 5 top founder-led companies .
Upgrade Your Decision Making: Choose your Legal & General Group Narrative
Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which are simply your own story about Legal & General Group linked directly to your assumptions about future revenue, earnings, margins and fair value. All of this is captured in an easy tool on Simply Wall St's Community page that compares your Fair Value with the current share price, updates automatically when fresh news or earnings arrive, and lets you see, for example, how one investor might build a bullish Narrative closer to £3.40 per share while another anchors on a more cautious £2.05. This allows you to decide which story, and which valuation, feels more realistic to you.
For Legal & General Group however we will make it really easy for you with previews of two leading Legal & General Group Narratives:
🐂 Legal & General Group Bull Case
Fair value in this bullish narrative: £2.67 per share
Implied discount to fair value versus the last close of £2.41: about 9.6% undervalued
Analyst revenue outlook used in this narrative: 5.46% annual decline
-
Analysts link long term demand for retirement and pension solutions to ageing populations and growth in defined contribution schemes, which shapes expectations for assets under management and fee income.
-
The narrative highlights a focus on alternatives, infrastructure and ESG related products, along with digital transformation and cost discipline, as factors that could support higher margins and more efficient operations.
-
On these assumptions, the analyst consensus price target sits at £2.67, with a range from £2.10 to £3.35. Investors are encouraged to test whether the revenue, margin and P/E assumptions line up with their own view of the business.
🐻 Legal & General Group Bear Case
Fair value in this bearish narrative: £2.05 per share
Implied premium to fair value versus the last close of £2.41: about 17.6% overvalued
Analyst revenue outlook used in this narrative: 5.31% annual decline
-
This more cautious narrative focuses on risks such as slower demographic growth, heavier regulation, and reliance on the UK market, which together could weigh on earnings, margins and dividend capacity over time.
-
It also flags competition from fintechs, asset managers and private players in pension de risking and asset management, with pressure on pricing power and fees if Legal & General does not keep pace.
-
Here, the bearish fair value of £2.05 reflects assumptions for lower future P/E multiples and a slightly higher discount rate. The underlying business case still relies on earnings progressing from today's level.
Do you think there's more to the story for Legal & General 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.
Companies discussed in this article include LGEN.L .
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
