CNA Financial Corporation (NYSE:CNA) received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to $53.58 at one point, and dropping to the lows of $46.98. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether CNA Financial’s current trading price of $47.58 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at CNA Financial’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for CNA Financial
Is CNA Financial still cheap?
According to my valuation model, CNA Financial seems to be fairly priced at around 17% above my intrinsic value, which means if you buy CNA Financial today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $40.52, there’s only an insignificant downside when the price falls to its real value. So, is there another chance to buy low in the future? Given that CNA Financial’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What kind of growth will CNA Financial generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. In the upcoming year, CNA Financial’s earnings are expected to increase by 23.25%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? CNA’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on CNA, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on CNA Financial. You can find everything you need to know about CNA Financial in the latest infographic research report. If you are no longer interested in CNA Financial, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.