Should Investors Reconsider Prudential Financial After Stocks Slide Nearly 5% This Week?
October 12, 2025
If you’re sitting on the fence about Prudential Financial stock, you’re not alone. With a history as sturdy as its name, but recent swings that may have made some investors anxious, it is only natural to wonder whether now is the time to buy, hold, or take profits. Over just the past week, shares have slipped by 4.7%, adding to a 7.3% drop over the last month. The year-to-date return stands at -16.2%, echoing a similar trend over the last 12 months. Despite this, Prudential’s longer-term record remains strong, with gains of 21.3% over three years and an impressive 90.7% over five years.
What is driving the recent cooling off? Much of it comes down to shifting market sentiment. As larger macroeconomic uncertainties have led investors to rethink their appetite for financial stocks, shares of Prudential have moved lower along with peers. Headlines about inflation, interest rates, and insurance sector headwinds have served as a backdrop, with risk perceptions changing even when the fundamental long-term story may not have.
The real question, of course, is whether the current price offers true value. According to a widely used valuation scoring system, Prudential Financial is considered undervalued in 2 out of 6 major checks, giving it a valuation score of just 2. That is a mixed report card, and only tells part of the story. Next, we will break down the main valuation approaches used for insurers like Prudential, before exploring a more insightful way to get to the heart of whether the stock is a bargain or not.
Prudential Financial scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
The Excess Returns valuation model estimates a company’s worth by analyzing how much profit it generates over and above its cost of equity capital. In simple terms, it looks at whether Prudential Financial can consistently deliver returns to shareholders that outpace the amount investors need as compensation for risk.
Prudential’s key metrics point to solid value creation. The company’s current book value stands at $86.89 per share while its expected stable book value is projected at $98.67 per share, according to consensus from eight analysts. The stable earnings per share (EPS) estimate is $13.81, sourced from future return on equity projections by nine analysts. Importantly, the average return on equity is modeled at 14.00 percent, well above the cost of equity, which is calculated at $8.32 per share. This results in an excess return of $5.49 per share, indicating Prudential is generating attractive incremental profit on top of shareholder requirements.
Using this framework, the model estimates Prudential’s intrinsic value at $201.37 per share, revealing a significant 50.8 percent discount to recent prices. This underscores a strong case that the stock is undervalued by the market at present.
Result: UNDERVALUED
Our Excess Returns analysis suggests Prudential Financial is undervalued by 50.8%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
The Price-to-Earnings (PE) ratio is one of the most reliable ways to value profitable companies like Prudential Financial because it tells us how much investors are willing to pay for each dollar of earnings. A higher PE can signal higher earnings growth expectations, while a lower PE may reflect slower growth or more risk. What counts as a “normal” or “fair” PE ratio typically depends on factors like the company’s growth prospects, risk profile, and how it compares to others in its industry.
Currently, Prudential Financial trades at a PE ratio of 21.6x. This is above the insurance industry average of 13.8x and its peer group average of 15.3x. This can suggest that the market is pricing in a more optimistic view on Prudential’s future profitability or potentially adding a premium for perceived strengths. However, to get a truer sense of what multiple the stock deserves, we use the “Fair Ratio.” This proprietary metric from Simply Wall St analyzes not just industry averages, but also considers Prudential’s earnings growth, margins, market cap, and unique risks.
The Fair Ratio for Prudential is 20.1x. Because this figure is tailored to the company’s specific profile and only slightly below the current PE, it suggests the stock’s valuation is about right by market standards. This approach gives a more complete and balanced view than simply relying on industry or peer averages.
Result: ABOUT RIGHT
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.
Earlier we mentioned that there’s an even better way to understand valuation, so let’s introduce you to Narratives, an easy and dynamic approach that goes beyond just the numbers. A Narrative is your unique perspective or “story” about a company, based on how you see its future revenue, profits, and risks coming together to produce fair value. Simply put, Narratives connect the dots between a company’s outlook, your forecast, and what you think it’s truly worth, making your investment decisions more intentional.
On Simply Wall St’s Community page, millions of investors use Narratives to quickly compare price and fair value, helping them decide when to buy or sell, and to see how different viewpoints stack up. The best part is that Narratives update as soon as fresh news or quarterly results are released, so your investment thinking is never outdated.
Take Prudential Financial as an example: some investors believe that global demographic changes and digital investments will drive significant growth and set a fair value as high as $136.0, while others are more cautious and value it as low as $88.0. With Narratives, you get to make more informed choices anchored in your own forecast and keep pace as the story evolves.
Do you think there’s more to the story for Prudential Financial? Create your own Narrative to let the Community know!
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 PRU.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
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