Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Cigna Corporation CI stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Cigna Corporation has a trailing twelve months PE ratio of 19.6, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 21.5. If we focus on the long-term PE trend, Cigna Corporation’s current PE level puts it above its midpoint over the past five years, with the number having risen slightly over the past few months.
However, the stock’s PE compares unfavorably with the industry’s trailing twelve months PE ratio, which stands at 14.3. This indicates that the stock is relatively overvalued right now, compared to its peers.
We should also point out that Cigna Corporation has a forward PE ratio (price relative to this year’s earnings) of 19.7, which is marginally higher than the current level. So on the ground of the forward earnings estimates, we might say that the company’s share price is likely to appreciate in the near future.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Cigna Corporation has a P/S ratio of about 1.3. This is lower than the S&P 500 average, which comes in at 3.4 right now. However, as we can see in the chart below, this is in line with the highs for this stock in particular over the past few years, which suggests that the company’s stock price has already appreciated to some degree, relative to its sales.
Broad Value Outlook
In aggregate, Cigna Corporation currently has a Zacks Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes Cigna Corporation a solid choice for value investors.
What About the Stock Overall?
Though Cigna Corporation might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of A and a Momentum score of D. This gives CI a Zacks VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen zero estimates go higher in the past sixty days compared to nine lower, while the full year estimate has seen ten upward and no downward revisions in the same time period.
As a result, the current quarter consensus estimate has fallen by 7% in the past two months, while the full year estimate has increased 3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Cigna Corporation Price and Consensus
Cigna Corporation Price and Consensus | Cigna Corporation Quote
Despite this somewhat mixed trend, the stock has a Zacks Rank #2 (Buy) on the back of its strong value metrics and this is why we are expecting above-average performance from the company in the near-term.
Bottom Line
Cigna Corporation is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 38%) and a solid Zacks Rank instills investor confidence.
However, it is hard to get too excited about this company overall as over the past two years, the industry has underperformed the broader market, as you can see below:
Despite the poor past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
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