Investors interested in stocks from the Insurance - Property and Casualty sector have probably already heard of CNA Financial (CNA) and Selective Insurance (SIGI). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, CNA Financial has a Zacks Rank of #2 (Buy), while Selective Insurance has a Zacks Rank of #3 (Hold). This means that CNA's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.
CNA currently has a forward P/E ratio of 12.82, while SIGI has a forward P/E of 16.26. We also note that CNA has a PEG ratio of 2.56. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. SIGI currently has a PEG ratio of 9.62.
Another notable valuation metric for CNA is its P/B ratio of 1.11. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, SIGI has a P/B of 1.86.
These are just a few of the metrics contributing to CNA's Value grade of B and SIGI's Value grade of C.
CNA is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that CNA is likely the superior value option right now.
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