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American Financial Group, Inc. (AFG) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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American Financial Group, Inc. (AFG)

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Intrinsic Value (DCF)

Current$131.90
→
Intrinsic$191.15
+45%
$130.54$191.15$306.37
Market implies 1% growth for 5 years
DCF analysis suggests AFG could have 45% upside at 8% growth — verify assumptions match your view.
At $132, the market prices in only 1% growth — below historical 8%, suggesting low expectations.
Range: Bear $131 → Bull $306. Current price implies expectations below the base case, but well above the bear case.
Discount ↓Growth →4%6%8%10%
8%$227$248$270$294
10%$162$176$191$208
12%$125$136$148$160
14%$102$111$120$130

Bull Case

  • Bull case ($306) offers 132% upside at 10% growth, 9% discount
  • 31% margin of safety vs. base case estimate
  • Market-implied growth (1%) ≤ historical CAGR (8%)

Bear Case

  • Bear case ($131) implies 1% downside at 6% growth, 12% discount
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5-Year Net Income Projection

Year 1$957.96M
Year 2$1.03B
Year 3$1.12B
Year 4$1.21B
Year 5$1.30B
Terminal$19.18B

📐 Model Inputs

Growth Rate8.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Net Income$887.00MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. Uses Net Income (FCF not meaningful for insurers). See FAQ below for full methodology.

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Frequently Asked Questions

Is AFG stock undervalued or overvalued?
🟢 UNDERVALUED

AFG trades at $131.90 vs. our DCF-derived intrinsic value of $191.15, implying +44% upside. At a 10.0% WACC and 8.0% projected FCF growth, the market appears to be underpricing the present value of AFG's future cash flows. The bear case ($138.24) still suggests upside, providing margin of safety.

What is AFG's intrinsic value?

Using a 5-year DCF model: Base FCF of $887M, projected at 8.0% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $69M net debt and dividing by 0.08B shares: Bear $138.24 | Base $191.15 | Bull $261.90. Current price $131.90 implies +44% to base case.

How is AFG's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 8.0% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($16.11B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 18.2x.