Let’s talk about the popular CNA Financial Corporation (NYSE:CNA). The company’s shares received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to $52.16 at one point, and dropping to the lows of $45.8. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether CNA Financial’s current trading price of $46.01 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at CNA Financial’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. View out our latest analysis for CNA Financial
What’s the opportunity in CNA Financial?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-equity ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 13.42x is currently trading slightly below its industry peers’ ratio of 14.16x, which means if you buy CNA Financial today, you’d be paying a reasonable price for it. And if you believe CNA Financial should be trading in this range, then there isn’t much 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 CNA Financial’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 CNA Financial?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. With profit expected to grow by 23.68% over the next year, the near-term future seems bright for CNA Financial. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in CNA’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at CNA? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping an eye on CNA, now may not be the most optimal time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for CNA, which means it’s worth further examining 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 CNA Financial. You can find everything you need to know about CNA Financial in the latest infographic research report. If you are no longer interested in CNA Financial, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.