Why Don't We See More Analyst Enthusiasm for CNA Financial (CNA)?

CNA Financial may be undervalued with mixed growth prospects, but the 2 analysts following the company give it an rating of hold. Their target prices range from $38.0 to $45.0 per share, for an average of $41.5. At today's price of $39.55, CNA Financial is trading -4.7% away from its average target price, suggesting there is an analyst consensus of some upside potential for the stock.

CNA Financial Corporation provides commercial property and casualty insurance products in the United States and internationally. Based in Chicago, IL, the large-cap Finance company has 6,100 full time employees. CNA Financial has provided a 4.1% dividend yield over the last 12 months.

CNA Financial has a trailing twelve month P/E ratio of 12.0, compared to an average of 14.34 for the Finance sector. Considering its EPS guidance of $4.99, the company has a forward P/E ratio of 7.9.

The average compound growth rate of the company's historical and projected earnings per share is 6.3%. On this basis, the company's PEG ratio is 1.85, which suggests that it is overpriced.

Furthermore, the market is potentially undervaluing CNA Financial in terms of its book value because its P/B ratio is 1.24. In comparison, the sector average P/B ratio is 1.57. The company's shares are currently -20.9% below their Graham number, indicating that its shares have a margin of safety.

The question is, why does CNA Financial have a bad rating if it is apparently undervalued in terms of traditional metrics? One reason could be the company's disappointing rate of margin growth, which in the analysts' opinion, will continue in coming years.

2020-02-11 2021-02-09 2022-02-08 2023-02-07
Revenue (MM) $10,767 $10,808 $11,908 $11,879
Interest Income (MM) -$131 -$122 -$113 -$112
Operating Margins 12.6% 8.7% 13.4% 10.0%
Net Margins 9.29% 6.38% 10.09% 7.53%
Net Income (MM) $1,000 $690 $1,202 $894
Depreciation & Amort. (MM) -$68 -$60 -$54 -$51
Earnings Per Share $3.67 $2.53 $4.41 $3.29
EPS Growth n/a -31.06% 74.31% -25.4%
Diluted Shares (MM) 272 272 273 271
Free Cash Flow (MM) $1,166 $1,798 $2,023 $2,554
Capital Expenditures (MM) -$26 -$23 -$26 -$52
Long Term Debt (MM) $2,679 $2,776 $2,779 $2,538
LT Debt to Equity 0.22 0.22 0.22 0.29
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