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Should You Retain CNO Financial (CNO) Stock in Portfolio?

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CNO Financial Group, Inc. (CNO - Free Report) shares have recently gained momentum. Year to date, the stock has gained 5.2%, outpacing the Zacks categorized Multi Line Insurance industry’s increase of 0.46%. This outperformance, which reflects shareholders’ confidence on this stock, may be attributed to the company’s prudent capital deployment like share repurchases and dividend payment.

The company’s Washington National segment has been delivering strong top-line performance over the last few quarters. CNO Financial also plans to restructure its field leadership and introduce technologically updated products to boost agent productivity in this particular segment.

CNO Financial’s strong cash position supports investment in agent productivity, geographic expansion, product launches, worksite platform distribution as well as enhancement of operating efficiencies and customer retention. In Apr 2016, it acquired Tennenbaum Capital Partners, which substantially boosted its return on investment. Recently, it also launched guaranteed lifetime income annuity. The company’s regular investments across the enterprise have significantly enhanced its operational efficiency.

The stock appears to be undervalued. Its Price to Cash flow (PCF) ratio of 4.26 is lower than the industry level of 6.57. Another important valuation ratio – Price to Sales (PS) – is 0.88 compared with the industry average of 0.95.

However, CNO Financial’s over dependence on debt remains a concern as it has been raising borrowing cost, limiting its profitability. Owing to its small market share, CNO Financial faces tremendous challenges in some product lines, such as life insurance and fixed annuities. Despite holding the ninth position in the list of the top writers in the individual long-term care insurance business, the company has been unable to grow it market share above 3%. This may limit business opportunities for CNO Financial.

Zacks Rank and Stocks to Consider:

CNO Financial presently has a Zacks Rank #3 (Hold).

Some better-ranked stocks from the insurance industry include American Financial Group, Inc. (AFG - Free Report) , Argo Group International Holdings, Ltd. and The Progressive Corporation (PGR - Free Report) . Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

American Financial offers property and casualty (P&C) insurance products in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 6.45%.

Argo Group International Holdings underwrites specialty insurance and reinsurance products in the P&C market worldwide. The company delivered positive surprises in all of the last four quarters with an average beat of 36.54%.

The Progressive Corporation offers personal and commercial P&C insurance, and other specialty P&C insurance and related services primarily in the United States. The company delivered a positive surprise in two of the last four quarters with an average beat of 1.32%.

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