Have you been paying attention to shares of Cigna (CI)? Shares have been on the move with the stock up 2% over the past month. The stock hit a new 52-week high of $288.46 in the previous session. Cigna has gained 24.1% since the start of the year compared to the -11.7% move for the Zacks Finance sector and the -4.6% return for the Zacks Insurance - Multi line industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 4, 2022, Cigna reported EPS of $6.22 versus consensus estimate of $5.44 while it beat the consensus revenue estimate by 2.73%.
For the current fiscal year, Cigna is expected to post earnings of $22.88 per share on $179.39 billion in revenues. This represents a 11.77% change in EPS on a 3.05% change in revenues. For the next fiscal year, the company is expected to earn $25.30 per share on $188.03 billion in revenues. This represents a year-over-year change of 10.55% and 4.82%, respectively.
Cigna may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Cigna has a Value Score of A. The stock's Growth and Momentum Scores are C and F, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 12.5X current fiscal year EPS estimates, which is a premium to the peer industry average of 10X. On a trailing cash flow basis, the stock currently trades at 9.5X versus its peer group's average of 7.2X. Additionally, the stock has a PEG ratio of 1.12. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Cigna currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Cigna fits the bill. Thus, it seems as though Cigna shares could have a bit more room to run in the near term.
How Does CI Stack Up to the Competition?
Shares of CI have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Old Republic International Corporation (ORI). ORI has a Zacks Rank of # 2 (Buy) and a Value Score of A, a Growth Score of C, and a Momentum Score of C.
Earnings were strong last quarter. Old Republic International Corporation beat our consensus estimate by 15%, and for the current fiscal year, ORI is expected to post earnings of $2.45 per share on revenue of $7.88 billion.
Shares of Old Republic International Corporation have gained 0.8% over the past month, and currently trade at a forward P/E of 9.24X and a P/CF of 7.43X.
The Insurance - Multi line industry is in the top 36% of all the industries we have in our universe, so it looks like there are some nice tailwinds for CI and ORI, even beyond their own solid fundamental situation.
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