Investors interested in stocks from the Insurance - Property and Casualty sector have probably already heard of CNA Financial (CNA) and Berkshire Hathaway Inc. (BRK.B). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
CNA Financial and Berkshire Hathaway Inc. are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that CNA's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
CNA currently has a forward P/E ratio of 11.06, while BRK.B has a forward P/E of 19.52. We also note that CNA has a PEG ratio of 2.21. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. BRK.B currently has a PEG ratio of 2.79.
Another notable valuation metric for CNA is its P/B ratio of 1.07. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, BRK.B has a P/B of 1.34.
These metrics, and several others, help CNA earn a Value grade of B, while BRK.B has been given a Value grade of D.
CNA sticks out from BRK.B in both our Zacks Rank and Style Scores models, so value investors will likely feel that CNA is the better option right now.
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CNA Financial Corporation (CNA) : Free Stock Analysis Report
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