HPT vs. HCP: Which Stock Should Value Investors Buy Now?
Estimates for CNA Financial, Inc. CNA have been revised upward over the past 60 days, buoying analysts’ optimism on the stock. The stock has seen the Zacks Consensus Estimate for 2018 and 2019 earnings being raised 3.7% and 7.5% to $4.17 and $4.30, respectively.
This commercial P&C insurance products provider sports a Zacks Rank #1 (Strong Buy). Shares of the company have lost 1.2% in a year against the industry's increase of 6.5%.
Nonetheless, shares of CNA Financial are trading at a price to book multiple of 1.07, lower than the industry average of 1.34. Price to book is the best multiple to value insurers because of large variations in their earnings results from one quarter to the next. The stock carries an impressive Value Score of B, which helps finding undervalued stocks. This deviation from the stocks’ fair value is what creates an exceptional upside opportunity. Back tested results show that stocks with a favorable Value Score of A or B coupled with a bullish Zacks Rank offer the best investment bets.
Let’s delve deeper into the factors that make CNA Financial a crucial choice for garnering hefty returns to investors.
Increasing Top Line: The company has witnessed its top line grow nearly 5% over the last two years, banking on increasing premiums and net investment income.
While stronger segmental performances should drive premiums, a steadily rising rate environment should drive investment results.
Improving Combined Ratio: The metric reflects underwriting profitability of a property and casualty insurer. Maintaining combined ratio at favorable levels even in a tough operating environment indicates its superior underwriting discipline.
Strong Capital Position: CNA Financial enjoys solid liquidity with debt-to-capital ratio remaining below 20-25%. A robust capital and liquidity position shields the company from market volatility, enabling it to retain its financial strength and flexibility for pursuit of new opportunities, in line with its long-term strategy.
Effective Capital Deployment: Banking on a strong balance sheet and cash flows, CNA Financial boasts an encouraging dividend history. While the insurer’s dividend hike witnessed a five year CAGR of 38.9%, it also pays special dividends. The current dividend yield is 2.45%, better than the industry average of 2.40%. These make the stock an attractive pick for yield-seeking investors.
Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $12.15, representing a year-over-year increase of 23.4% on 9.2% higher revenues of $10.3 billion. For 2019, the consensus mark for EPS stands at $4.30, translating into a 3.2% year-over-year rise while the same for revenues is projected at $10.7 billion, up 4.1%.
CNA Financial has an expected long-term earnings per share growth rate of 5%.
Positive Earnings Surprise History: The company boasts a stellar earnings surprise history, exceeding the Zacks Consensus Estimate in the last five quarters with an average beat of 40.39%.
Other Stocks to Consider
Investors interested in the insurance industry may also consider other top-ranked stocks like Alleghany Corporation Y, NMI Holdings Inc. NMIH and HCI Group, Inc. HCI, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. It pulled off an average four-quarter positive surprise of 17.61%.
NMI Holdings provides private mortgage guaranty insurance services in the United States. The company came up with positive surprises in the last four quarters, the average beat being 24.55%.
HCI Group primarily engages in the property and casualty insurance business in Florida. The company delivered an average four-quarter earnings surprise of 1.57%.
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