CNA Financial Corporation CNA shares are trading at a discount to the Zacks Property and Casualty Insurance industry. Its price-to-book value of 1.21X is lower than the industry average of 1.53X.
The company has a Value Score of A, which suggests that the stock is cheap and indicates a favorable valuation at this moment. This style score helps find the most attractive value stocks.
Being one of the largest U.S. commercial lines insurers, CNA has a market capitalization of $13.1 billion. The average volume of shares traded in the last three months was 0.3 million.
Image Source: Zacks Investment Research
Shares of other insurers like The Allstate Corporation ALL, Chubb Limited CB and The Progressive Corporation PGR are also trading at a multiple higher than the industry average.
CNA shares have underperformed the industry, the Finance sector as well as the Zacks S&P 500 composite index in the past six months. CNA shares are trading below the 50-day moving average, indicating a bearish trend.
CNA vs Industry, Sector & S&P 500 in 6-Months
Image Source: Zacks Investment Research
However, based on short-term price targets offered by two analysts, the Zacks average price target is $50 per share. The average suggests a potential 3.7% upside from Monday’s closing price.
Return on Capital
CNA’s return on equity for the trailing 12 months is 13.3%, better than the industry average of 7.6%. This reflects efficiency in utilizing shareholders’ funds.
The return on invested capital in the trailing 12 months was 2.2%, which compared unfavorably with the industry average of 5.8%. This reflects the insurer’s inefficiency in utilizing funds to generate income.
Growth Projection
The Zacks Consensus Estimate for CNA Financial’s 2024 earnings is pegged at $4.68 per share, indicating a decrease of 0.6% on 7% higher revenues of $12.4 billion. The Zacks Consensus Estimate for CNA’s 2025 earnings is pegged at $4.85 per share, indicating an increase of 3% on 4.9% higher revenues of $13.2 billion.
The expected long-term earnings growth rate is currently pegged at 1.7%.
Growth Drivers
CNA Financial’s premiums should continue to grow on solid retention, favorable renewal premium change and new business growth across Specialty, Commercial and International segments.
With the recent cut in interest rate, the Fed has made three rate cuts this year since September. It has also indicated at least two more cuts in 2025. An improving rate environment is favorable for an insurer. Amid this lower rate environment, the company’s fixed-income investment strategy with the highest allocations to diversified investment grade corporates as well as highly rated municipal securities should support investment results.
CNA Financial has a solid balance sheet with capital remaining above the target levels required for all ratings. It exited the third quarter of 2024 with $11.3 billion in statutory surplus. CNA Financial continues to maintain a conservative capital structure. It maintains liquidity in the form of cash and short-term investments, which help to sustain business variability.
Parting Thoughts on CNA Stock
Banking on prudent underwriting, this insurer has been improving underlying combined ratios in each of its P&C segments. CNA Financial has also been meaningfully reducing its LTC exposures and risk profiles through active management.
The insurer’s dividend history is impressive. As part of wealth distribution, the insurer has been hiking dividends, apart from paying special dividends. Its dividend yield of 3.6% is better than the industry average of 0.3%, making it an attractive pick for yield-seeking investors.
A higher target price and a VGM Score of B instill confidence in the stock.
However, CNA’s unfavorable leverage as well as times interest earned keeps us cautious on this Zacks Rank #3 (Hold) stock. Therefore, new investors can wait for some more time before adding the stock to their portfolios. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Chubb Limited (CB) : Free Stock Analysis Report
The Allstate Corporation (ALL) : Free Stock Analysis Report
The Progressive Corporation (PGR) : Free Stock Analysis Report
CNA Financial Corporation (CNA) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
