When Cincinnati Financial Corporation (NASDAQ:CINF) released its most recent earnings update (31 March 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Cincinnati Financial has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see CINF has performed.
Did CINF beat its long-term earnings growth trend and its industry?
CINF's trailing twelve-month earnings (from 31 March 2019) of US$1.0b has jumped 25% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 13%, indicating the rate at which CINF is growing has accelerated. What's the driver of this growth? Let's see if it is merely a result of industry tailwinds, or if Cincinnati Financial has seen some company-specific growth.
In terms of returns from investment, Cincinnati Financial has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. However, its return on assets (ROA) of 4.6% exceeds the US Insurance industry of 2.5%, indicating Cincinnati Financial has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Cincinnati Financial’s debt level, has declined over the past 3 years from 6.0% to 5.9%.
What does this mean?
Though Cincinnati Financial's past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research Cincinnati Financial to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CINF’s future growth? Take a look at our free research report of analyst consensus for CINF’s outlook.
- Financial Health: Are CINF’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2019. This may not be consistent with full year annual report figures.
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