Is CNO Financial Group (CNO) Pricing Reflect Its Mixed Valuation Signals?

• If you are wondering whether CNO Financial Group is fairly priced or has more room to run, you are in the right place to unpack what the current share price may be implying.
• The stock recently closed at US$43.06, with returns of 0.0% over the last 7 days, 3.7% over 30 days, 2.0% year to date and 5.1% over the past year, while the 3 year and 5 year returns sit at 86.0% and 98.0% respectively.
• Recent coverage of CNO Financial Group has focused on its share price performance and how investors are weighing its prospects against other US insurance names. This article aims to provide ongoing, evergreen context so you can see how that pricing lines up with the fundamentals using a few different valuation lenses.
• On Simply Wall St’s 6 point valuation checklist, CNO Financial Group scores 2 out of 6, as shown in its valuation score. Next we will look at how approaches like DCF and multiples compare, before finishing with a broader way to think about what valuation really means for long term investors.

CNO Financial Group scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: CNO Financial Group Excess Returns Analysis

The Excess Returns model looks at how much profit a company generates above the return that equity investors typically require, and then capitalizes those surplus profits into an intrinsic value per share.

For CNO Financial Group, the starting point is its Book Value of US$27.92 per share and a Stable EPS estimate of US$4.15 per share, based on the median return on equity from the past 5 years. The model assumes a Cost of Equity of US$2.57 per share, which implies an Excess Return of US$1.58 per share that is treated as value created over and above the required return.

The analysis also uses a Stable Book Value of US$33.33 per share, sourced from weighted future book value estimates from 3 analysts, and an Average Return on Equity of 12.45%. Together, these inputs are used to project ongoing excess returns and convert them into an estimated intrinsic value of US$70.12 per share.

Compared with the recent share price of US$43.06, the model implies CNO Financial Group is 38.6% undervalued on this basis.

Result: UNDERVALUED

Our Excess Returns analysis suggests CNO Financial Group is undervalued by 38.6%. Track this in your watchlist or portfolio, or discover 55 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for CNO Financial Group.

Approach 2: CNO Financial Group Price vs Earnings

P/E is a common way to think about value for profitable companies because it links what you pay directly to what the business is earning per share. In general, higher expected earnings growth and lower perceived risk can support a higher “normal” or “fair” P/E, while slower growth and higher risk usually point to a lower one.

CNO Financial Group currently trades on a P/E of 17.75x. That sits above the Insurance industry average of 12.22x and the peer group average of 9.50x, which on a simple comparison can make the stock look relatively expensive.

Simply Wall St’s Fair Ratio for CNO Financial Group is 16.04x. This is a proprietary estimate of what a reasonable P/E might be for the company, taking into account factors such as its earnings growth profile, industry, profit margins, market cap and risk characteristics, rather than relying only on broad industry or peer averages. Because it adjusts for these company specific drivers, the Fair Ratio can be a more tailored yardstick than a straight peer or sector comparison.

Comparing the Fair Ratio of 16.04x with the current P/E of 17.75x suggests the shares are trading above this tailored benchmark, which points to CNO Financial Group looking overvalued on this metric.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your CNO Financial Group Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. These are simple stories that you, and other investors on Simply Wall St’s Community page, attach to CNO Financial Group’s numbers by linking your assumptions about future revenue, earnings, margins and a fair value to the current share price. This allows you to see at a glance whether your story says “buy,” “hold,” or “sell,” with the platform automatically updating those Narratives when new information like earnings or news arrives. It also allows very different views to sit side by side. For example, one investor may see CNO as fairly priced around the analyst consensus fair value of about US$47.25, based on expectations for revenue of US$4.3b, earnings of US$432.2m and a 9.9x future P/E by 2028. Another investor might use the same data but insist on a larger discount or lower future multiple, which leads to a lower fair value and a very different decision when they compare that number to today’s price.

Do you think there's more to the story for CNO Financial Group? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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