Company Profile (excerpt from Reuters): Cigna Corporation (Cigna), incorporated on November 3, 1981, 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, and Other Operations and Corporate. The Company’s 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, Medicare and Medicaid products and health, life and accident insurance coverages to individuals in the United States and international markets. The Company’s other business operations include corporate-owned life insurance business (COLI), run-off reinsurance and settlement annuity businesses.
Downloadable PDF version of this valuation:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|Defensive Investor; must pass all 6 of the following tests.|
|1. Adequate Size of the Enterprise||Market Cap > $2Bil||$73,825,240,499||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||98.78%||Pass|
|5. Moderate PEmg Ratio||PEmg < 20||20.83||Fail|
|6. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||3.07||Fail|
|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
|MG Growth Estimate||8.13%|
|MG Value based on 3% Growth||$134.96|
|MG Value based on 0% Growth||$79.11|
|Market Implied Growth Rate||6.17%|
|% of Intrinsic Value||84.12%|
Cigna Holding Co is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $6.04 in 2014 to an estimated $9.31 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 6.17% 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 within a margin of safety relative to the price.
At the time of valuation, further research into Cigna Holding Co revealed the company was trading above its Graham Number of $122.31. The company pays a dividend of $0.04 per share, for a yield of 0% Its PEmg (price over earnings per share – ModernGraham) was 20.83, which was below the industry average of 30.63, which by some methods of valuation makes it one of the most undervalued stocks in its industry.
Cigna Holding Co receives an average overall rating in the ModernGraham grading system, scoring a C+.
Stage 3: Information for Further Research
|Number of Consecutive Years of Dividend Growth||0|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||9/1/2018|
|Long-Term Debt & Capital Lease Obligation||$25,041,000,000|
|Shares Outstanding (Diluted Average)||246,112,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$11.81|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$9.31|
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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.