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Horace Mann Educators Corporation (HMN) Intrinsic Value

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

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Horace Mann Educators Corporation (HMN)

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Intrinsic Value (DCF)

Current$42.88
→
Intrinsic$32.60
-24%
$18.40$32.60$59.59
Market implies 13% growth for 5 years
HMN trades at a premium to our conservative estimate — investors expect above-average performance.
At $43, the market prices in 13% annual cash flow growth — a moderate expectation aligned with historical trends (8%).
Range: Bear $18 → Bull $60. Current price implies expectations above the base case, closer to bull expectations.
Discount ↓Growth →4%6%8%10%
8%$41$46$51$57
10%$26$29$33$36
12%$17$20$22$25
14%$12$14$16$18

Bull Case

  • Bull case ($60) offers 39% upside at 10% growth, 9% discount
  • Conservative 8% growth assumption is achievable based on track record

Bear Case

  • Bear case ($18) implies 57% downside at 6% growth, 12% discount
  • Price reflects 13% growth expectations vs 8% historical — high bar to clear
  • Trading 24% above base case — execution must exceed assumptions to justify
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5-Year Net Income Projection

Year 1$111.02M
Year 2$119.91M
Year 3$129.50M
Year 4$139.86M
Year 5$151.05M
Terminal$2.22B

📐 Model Inputs

Growth Rate8.0%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Net Income$102.80MTTM 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 HMN stock undervalued or overvalued?
🔴 OVERVALUED

HMN trades at $42.88 vs. our DCF-derived intrinsic value of $32.60, implying -28% downside. Using a 10.0% WACC and 8.0% FCF growth assumption, the current price requires growth rates above our estimates to be justified. Even our bull case ($49.17) suggests limited upside.

What is HMN's intrinsic value?

Using a 5-year DCF model: Base FCF of $103M, 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 $514M net debt and dividing by 0.04B shares: Bear $20.20 | Base $32.60 | Bull $49.17. Current price $42.88 implies -28% to base case.

How is HMN'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 ($1.87B).

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.