A Look At Cannae Holdings Inc (NYSE:CNNE) And The Consumer Sector
Cannae Holdings Inc (NYSE:CNNE), a US$1.20B small-cap, is a consumer discretionary company operating in an industry, whose performance is predominantly driven by consumer confidence. Macro elements tend to determine how fast, and how often, consumers buy leisure products. Consumer discretionary analysts are forecasting for the entire industry, a positive double-digit growth of 14.45% in the upcoming year , and an optimistic near-term growth of 15.76% over the next couple of years. This rate is more than double the growth rate of the US stock market as a whole. Today, I will analyse the industry outlook, and also determine whether Cannae Holdings is a laggard or leader relative to its consumer discretionary sector peers. See our latest analysis for Cannae Holdings
What’s the catalyst for Cannae Holdings’s sector growth?
Rising competition for consumer attention from new activities such as online streaming and mobile games has forced traditional incumbents to adapt or fall behind. However, the leisure service industry as a whole has been expanding. In the previous year, the industry saw growth in the teens, beating the US market growth of 9.88%. Given the lack of analyst consensus in Cannae Holdings’s outlook, we could potentially assume the stock’s growth rate broadly follows its leisure industry peers. This means it is an attractive growth stock relative to the wider US stock market.
Is Cannae Holdings and the sector relatively cheap?
The leisure industry is trading at a PE ratio of 23.65x, relatively similar to the rest of the US stock market PE of 19.15x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 11.13% on equities compared to the market’s 10.46%. Since Cannae Holdings’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Cannae Holdings’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:
If you’ve been keeping an eye on the consumer discretionary sector, now is the right time to dive deeper into the stock-level. The high growth prospect makes stocks such as Cannae Holdings a more appealing investment case, though the industry is trading relatively in-line with the rest of the wider market. However, before you make a decision on the stock, I suggest you look at Cannae Holdings’s fundamentals in order to build a holistic investment thesis.
1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Historical Track Record: What has CNNE’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Cannae Holdings? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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.
