A strong performer from today's afternoon trading session is Cigna, whose shares rose 1.9% to $275.06 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:
The Cigna Group, together with its subsidiaries, provides insurance and related products and services in the United States. The company belongs to the Health Care sector, which has an average price to earnings (P/E) ratio of 24.45 and an average price to book (P/B) ratio of 4.16. In contrast, Cigna has a trailing 12 month P/E ratio of 12.6 and a P/B ratio of 1.83.
When we divideCigna's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.99, which indicates that the market is undervaluing the company's projected growth (a PEG ratio of 1 indicates a fairly valued company). Your analysis of the stock shouldn't end here. Rather, a good PEG ratio should alert you that it may be worthwhile to take a closer look at the stock.
EPS Growth Acheived Primarily Through Stock Repurchases:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $153,743 | $160,577 | $174,272 | $180,642 |
| Net Margins | 3.32% | 5.27% | 3.08% | 3.69% |
| Net Income (MM) | $5,104 | $8,458 | $5,365 | $6,668 |
| Net Interest Expense (MM) | -1,682 | -1,438 | -1,208 | -1,228 |
| Net Interest Expense (MM) | -$1,682 | -$1,438 | -$1,208 | -$1,228 |
| Depreciation & Amort. (MM) | -$3,651 | -$2,802 | -$2,923 | -$2,937 |
| Earnings Per Share | $13.44 | $22.96 | $15.73 | $21.82 |
| EPS Growth | n/a | 70.83% | -31.49% | 38.72% |
| Diluted Shares (MM) | 380 | 368 | 341 | 296 |
| Free Cash Flow (MM) | $8,435 | $9,256 | $6,037 | $7,361 |
| Capital Expenditures (MM) | -$1,050 | -$1,094 | -$1,154 | -$1,295 |
| Long Term Debt (MM) | $31,893 | $29,545 | $31,125 | $28,100 |
| Net Debt / EBITDA | 2.76 | 1.51 | 2.63 | 2.02 |
Cigna has growing revenues and increasing reinvestment in the business, a steady stream of strong cash flows, and healthy leverage. However, the firm suffers from weak net margins with a stable trend and good EPS growth resulting mainly from stock repurchases.
