CNO Financial Group, Inc. (NYSE:CNO), which is in the insurance business, and is based in United States, saw a significant share price rise of over 20% in the past couple of months on the NYSE. As a US$2.6b market-cap stock, it seems odd CNO Financial Group is not more well-covered by analysts. However, this is not necessarily a bad thing given that there are less eyes on the stock to push it closer to fair value. Is there still an opportunity to buy? Today I will analyse the most recent data on CNO Financial Group’s outlook and valuation to see if the opportunity still exists.
Is CNO Financial Group still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that CNO Financial Group’s ratio of 16.91x is trading slightly above its industry peers’ ratio of 16.59x, which means if you buy CNO Financial Group today, you’d be paying a relatively reasonable price for it. And if you believe CNO Financial Group should be trading in this range, then there isn’t really any room for the share price grow beyond what it’s currently trading. Although, there may be an opportunity to buy in the future. This is because CNO Financial Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
Can we expect growth from CNO Financial Group?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 90% over the next couple of years, the future seems bright for CNO Financial Group. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? CNO’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at CNO? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on CNO, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for CNO, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on CNO Financial Group. You can find everything you need to know about CNO Financial Group in the latest infographic research report. If you are no longer interested in CNO Financial Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.