Over the past six months, CNO Financial Group has been a great trade, beating the S&P 500 by 13.4%. Its stock price has climbed to $52.43, representing a healthy 21.1% increase. This run-up might have investors contemplating their next move.
Is now the time to buy CNO Financial Group, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think CNO Financial Group Will Underperform?
We’re glad investors have benefited from the price increase, but we’re sitting this one out for now. Here are three reasons you should be careful with CNO, plus one stock we’d rather own.
1. Net Premiums Earned Point to Soft Demand
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 has grown at a 1% annualized rate over the last five years, much worse than the broader insurance industry and in line with its total revenue.
2. Substandard BVPS Growth Indicates Limited Asset Expansion
In the insurance industry, book value per share (BVPS) provides a clear picture of shareholder value, as it represents the total equity backing a company’s insurance operations and growth initiatives.
To the detriment of investors, CNO Financial Group’s BVPS grew at a mediocre 10.5% annual clip over the last two years.
Final Judgment
CNO Financial Group falls short of our quality standards. With its shares beating the market recently, the stock trades at 1.8× forward P/B (or $52.43 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better opportunities elsewhere. We’d recommend looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
Stocks We Like More Than CNO Financial Group
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