Insurance Stocks

Cigna Corp Valuation – July 2016 $CI

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Cigna Corp (CI) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Cigna Corporation (Cigna), together with its subsidiaries, is a health services company. The Company offers medical, dental, disability, life and accident insurance and related products and services. The Company’s segments include Global Health Care, Global Supplemental Benefits, Group Disability and Life, Other Operations and Corporate. The Global Health Care segment aggregates the commercial and Government operating segments. The Global Supplemental Benefits segment offers supplemental health, life and accident insurance products primarily in Asia, Europe and the United States. The Company’s Global Supplemental Benefits segment offers supplemental health, life and accident insurance products primarily in Asia, Europe and the United States. Its products are offered through employers and other groups, such as Governmental and non-Governmental organizations, unions and associations. Cigna also offers commercial health and dental insurance, and Medicare and Medicaid products and health.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of CI – July 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $32,975,542,507 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 159.27% Pass
5. Moderate PEmg Ratio PEmg < 20 16.23 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.60 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

CI value chart July 2016

EPSmg $7.82
MG Growth Estimate 9.25%
MG Value $211.32
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $113.46
MG Value based on 0% Growth $66.51
Market Implied Growth Rate 3.87%
Current Price $127.00
% of Intrinsic Value 60.10%

CIGNA Corporation qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.84 in 2012 to an estimated $7.82 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.87% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

CIGNA Corporation receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

CI charts July 2016

Graham Number $100.89
PEmg 16.23
PB Ratio 2.60
Dividend Yield 0.03%
TTM Dividend $0.04
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Long-Term Debt $4,791,000,000
Total Assets $58,884,000,000
Intangible Assets $6,029,000,000
Total Liabilities $46,209,000,000
Shares Outstanding (Diluted Average) 259,447,000

Earnings Per Share History

Next Fiscal Year Estimate $9.15
Dec2015 $8.04
Dec2014 $7.83
Dec2013 $5.18
Dec2012 $5.61
Dec2011 $4.84
Dec2010 $4.89
Dec2009 $4.73
Dec2008 $1.05
Dec2007 $3.87
Dec2006 $3.43
Dec2005 $4.17
Dec2004 $3.48
Dec2003 $1.58
Dec2002 -$0.94
Dec2001 $2.20
Dec2000 $2.03
Dec1999 $3.00
Dec1998 $2.02
Dec1997 $1.63
Dec1996 $1.54

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $7.82
Dec2015 $6.87
Dec2014 $6.08
Dec2013 $5.16
Dec2012 $4.84
Dec2011 $4.26
Dec2010 $3.85
Dec2009 $3.37
Dec2008 $2.86
Dec2007 $3.61
Dec2006 $3.10
Dec2005 $2.66
Dec2004 $1.82
Dec2003 $1.19
Dec2002 $1.21
Dec2001 $2.25
Dec2000 $2.20

Recommended Reading:

Other ModernGraham posts about the company

5 Undervalued Companies with a Low Beta – July 2016
5 Companies for Enterprising Investors Near 52 Week Lows – June 2016
5 Undervalued Companies with a Low Beta – May 2016
26 Best Stocks For Value Investors This Week – 2/6/16
Cigna Corp Valuation – January 2016 Update $CI

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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