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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Cigna Corporation (CI - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Cigna has a trailing twelve months PE ratio of 18.27, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 19.50. If we focus on the stock’s long-term PE trend, the current level puts Cigna’s current PE ratio above its midpoint over the past five years, with the number having risen rapidly lately.
The stock’s PE is above the Zacks classified Insurance-Multi Line industry’s trailing twelve months PE ratio, which stands at 15.76. While this indicates that the stock is relatively overvalued right now, compared to its peers, its forward PE ratio (price relative to this year’s earnings) of just 15.57 implies that a slightly more value-oriented path may be ahead for Cigna stock in the near term.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Cigna has a P/S ratio of about 0.97. This is much lower than the S&P 500 average, which comes in at 3 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business.This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Cigna’s P/CF ratio of 3.20 is lower than the Zacks classified Insurance-Multi Line industry average of 17.55, which indicates that the stock is undervalued in this respect too.
Broad Value Outlook
In aggregate, Cigna currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Cigna a solid choice for value investors.
What About the Stock Overall?
Though Cigna might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘B’ and a Momentum score of ‘D’. This gives CI a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen five estimates go higher in the past sixty days compared to none lower, while the full year estimate has seen one up and three down in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has risen by 2.9% in the past two months, while the full year estimate has inched lower by 0.7%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Cigna is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 23% compared to over 250 industries) further underlines the potential of the company overall. In fact, over the past two years, the Zacks Insurance-Multi Line industry has clearly outperformed the broader market, as you can see below:
However, a Zacks Rank #3 indicates analysts have some apprehensions about the stock in the immediate future. So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>
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Is Cigna (CI) a Great Stock for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Cigna Corporation (CI - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Cigna has a trailing twelve months PE ratio of 18.27, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 19.50. If we focus on the stock’s long-term PE trend, the current level puts Cigna’s current PE ratio above its midpoint over the past five years, with the number having risen rapidly lately.
The stock’s PE is above the Zacks classified Insurance-Multi Line industry’s trailing twelve months PE ratio, which stands at 15.76. While this indicates that the stock is relatively overvalued right now, compared to its peers, its forward PE ratio (price relative to this year’s earnings) of just 15.57 implies that a slightly more value-oriented path may be ahead for Cigna stock in the near term.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Cigna has a P/S ratio of about 0.97. This is much lower than the S&P 500 average, which comes in at 3 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business.This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Cigna’s P/CF ratio of 3.20 is lower than the Zacks classified Insurance-Multi Line industry average of 17.55, which indicates that the stock is undervalued in this respect too.
Broad Value Outlook
In aggregate, Cigna currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Cigna a solid choice for value investors.
What About the Stock Overall?
Though Cigna might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘B’ and a Momentum score of ‘D’. This gives CI a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen five estimates go higher in the past sixty days compared to none lower, while the full year estimate has seen one up and three down in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has risen by 2.9% in the past two months, while the full year estimate has inched lower by 0.7%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Cigna Corporation Price and Consensus
Cigna Corporation Price and Consensus | Cigna Corporation Quote
This somewhat mixed trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.
Bottom Line
Cigna is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Moreover, a strong industry rank (Top 23% compared to over 250 industries) further underlines the potential of the company overall. In fact, over the past two years, the Zacks Insurance-Multi Line industry has clearly outperformed the broader market, as you can see below:
However, a Zacks Rank #3 indicates analysts have some apprehensions about the stock in the immediate future. So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>