CNO Financial Group Inc Valuation – August 2018 $CNO

Company Profile (excerpt from Reuters): CNO Financial Group, Inc., incorporated on March 25, 2003, is a holding company for a group of insurance companies operating throughout the United States that develops, markets and administers health insurance, annuity, individual life insurance and other insurance products. The Company’s segments include Bankers Life, Washington National and Colonial Penn. It sells health insurance, annuity, individual life insurance and other insurance products through three primary distribution channels: career agents, independent producers and direct marketing.


Downloadable PDF version of this valuation:

ModernGraham Valuation of CNO – August 2018

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 $3,730,850,520 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 96.14% Pass
5. Moderate PEmg Ratio PEmg < 20 14.28 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.84 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

EPSmg $1.56
MG Growth Estimate 8.04%
MG Value $38.32
Opinion Undervalued
MG Grade B+
MG Value based on 3% Growth $22.60
MG Value based on 0% Growth $13.25
Market Implied Growth Rate 2.89%
Current Price $22.26
% of Intrinsic Value 58.09%

CNO Financial Group Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history. 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 Undervalued after growing its EPSmg (normalized earnings) from $1.01 in 2014 to an estimated $1.56 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.89% 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.

At the time of valuation, further research into CNO Financial Group Inc revealed the company was trading below its Graham Number of $36.61. The company pays a dividend of $0.35 per share, for a yield of 1.6% Its PEmg (price over earnings per share – ModernGraham) was 14.28, which was below the industry average of 36.08, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

CNO Financial Group Inc performs fairly well in the ModernGraham grading system, scoring a B+.

Stage 3: Information for Further Research

Graham Number $36.61
PEmg 14.28
PB Ratio 0.84
Dividend Yield 1.57%
TTM Dividend $0.35
Number of Consecutive Years of Dividend Growth 6

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Long-Term Debt & Capital Lease Obligation $3,980,100,000
Total Assets $32,472,200,000
Intangible Assets $0
Total Liabilities $28,017,300,000
Shares Outstanding (Diluted Average) 167,978,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.05
Dec2017 $1.02
Dec2016 $2.01
Dec2015 $1.39
Dec2014 $0.24
Dec2013 $2.06
Dec2012 $0.83
Dec2011 $1.15
Dec2010 $0.99
Dec2009 $0.45
Dec2008 -$6.13
Dec2007 -$1.12
Dec2006 $0.45
Dec2005 $1.69
Dec2004 $1.48
Dec2003 $22.68

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.56
Dec2017 $1.32
Dec2016 $1.42
Dec2015 $1.13
Dec2014 $1.01
Dec2013 $1.30
Dec2012 $0.43
Dec2011 -$0.15
Dec2010 -$0.90
Dec2009 -$1.54
Dec2008 -$1.93
Dec2007 $1.79
Dec2006 $3.92
Dec2005 $5.49
Dec2004 $6.54
Dec2003 $7.56

Recommended Reading:

Other ModernGraham posts about the company

12 Best Stocks for Value Investors This Week – 2/4/17
Best Stocks Below Their Graham Number – January 2017
CNO Financial Group Inc Valuation – January 2017 $CNO

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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.

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