Aviva’s share price is down 13% to under £7, despite outstanding 2025 results! Time for me to buy more?
Avivaâs (LSE: AV) share price still suffers from the long shadow of its past, in my view. The market prices the firm as if it were still the messy, sprawling, dividendâcutting insurer investors remember.
But the Aviva of 2026 is a very different operation: capitalâlight, cashârich, tightly focused and consistently delivering on its financial targets ahead of schedule.
That disconnect is precisely this misalignment that creates such a compelling undervaluation opportunity for savvy longâterm investors.
Undervalued to peers?
A good starting point to assess whether a stock is undervalued is comparing it on key measures with its competitors. I use forward-looking measures because I am interested in a firmâs future earnings power, not what it has done in the past.
On the key price-to-sales measure, Avivaâs 0.5 is bottom of its peer group, which averages 2.1. The firms comprise Legal & General at 1.3, Admiral at 1.7, Swiss Life at 2.6, and Prudential at 3.1. So, it looks very undervalued on this basis.
The same is true of its 12.6 price-to-earnings ratio against the 12.9 average of its competitors. And it also looks cheap on its 1.8 price-to-book ratio versus its peersâ average of 4.
Truly undervalued?
A discounted cash flow analysis pinpoints where any stock should be priced — its âfair valueâ — based on the underlying businessâs fundamentals. It does this by projecting a firmâs future cash flows and then discounting them back to today. Some analystsâ modelling is more bearish than mine though.
However, based on my own DCF assumptions â including a 7.2% discount rate â Aviva shares are 51% undervalued at their current £6.09 price. This implies a fair value for the shares of around £12.43 — more than double where it trades today.
Share prices can converge to their fair value over time. So this price-value gap suggests a potentially superb buying opportunity to consider today if those DCF assumptions hold.
Supported by strong earnings growth?
Profit growth ultimately powers any stock price higher over time. A risk here for Aviva is that a sharp fall in financial markets could reduce the value of its investment portfolio and weaken its capital position. Another is that prolonged high inflation could increase its operating costs and reduce the profitability of its core insurance and savings businesses.
However, analysts forecast that Avivaâs earnings growth will average a strong 15% a year to end-2028. This looks conservative to me, given the firmâs outstanding 2025 results, released on 5 March.
These showed operating profit soaring 25% year on year to £2.2bn, achieving the £2bn+ target one year early. Meanwhile, operating earnings per share jumped 17% to 56p. Given these excellent figures, management announced a £350m buyback, which tends to support share price gains.
My investment view
I believe Aviva is a fundamentally much stronger business than its valuation implies. The transformation of the group is clear in both its financial delivery and its forward earnings power. Yet the market continues to price it as if little has changed.
For longâterm investors seeking major capital appreciation potential, I think that disconnect could be highly attractive. And I will certainly be adding to my existing £20,000 holding very shortly.
In the meantime, other high-yielding, undervalued FTSE stocks have also caught my eye.
The post Avivaâs share price is down 13% to under £7, despite outstanding 2025 results! Time for me to buy more? appeared first on The Motley Fool UK.
Should you invest £1,000 in Aviva plc right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Aviva plc made the list?
More reading
- Stocks & Shares ISA deadline looms: could this market wobble unlock a rare chance to buy cheap FTSE shares?
- 3 shares to consider buying as the FTSE 100 plummets
- How much do you really need in an ISA to earn a £20,000 passive income
- Aviva shares now yield 6.6%. Time to consider buying?
- Want to try and turn £5,000 of savings into a £1,068+ monthly passive income? Hereâs how
Simon Watkins has positions in Admiral Group Plc, Aviva Plc, and Legal & General Group Plc. The Motley Fool UK has recommended Admiral Group Plc and Prudential Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
