CNO Financial Group trades at $43.54 per share and has stayed right on track with the overall market, gaining 14% over the last six months. At the same time, the S&P 500 has returned 12.7%.
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Why Is CNO Financial Group Not Exciting?
We're cautious about CNO Financial Group. Here are three reasons why CNO doesn't excite us and a stock we'd rather own.
1. Net Premiums Earned Hit a Plateau
When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.
CNO Financial Group’s net premiums earned was flat over the last five years, much worse than the broader insurance industry and in line with its total revenue.
2. Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect CNO Financial Group’s revenue to rise by 3.8%, close to its 3.8% annualized growth for the past two years. This projection is underwhelming and implies its newer products and services will not accelerate its top-line performance yet.
3. Growing BVPS Reflects Strong Asset Base
For insurers, book value per share (BVPS) is a vital measure of financial health, representing the total assets available to shareholders after accounting for all liabilities, including policyholder reserves and claims obligations.
Although CNO Financial Group’s BVPS declined at a 5.7% annual clip over the last five years. the good news is that its growth inflected positive over the past two years as BVPS grew at an incredible 27.1% annual clip (from $16.85 to $27.24 per share).
Final Judgment
CNO Financial Group’s business quality ultimately falls short of our standards. That said, the stock currently trades at 1.5× forward P/B (or $43.54 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better stocks to buy right now. We’d suggest looking at the most entrenched endpoint security platform on the market.
Stocks We Would Buy Instead of CNO Financial Group
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