Does Cincinnati Financial Corporation’s (NASDAQ:CINF) Recent Track Record Look Strong?

After reading Cincinnati Financial Corporation’s (NasdaqGS:CINF) most recent earnings announcement (30 June 2019), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.

Check out our latest analysis for Cincinnati Financial

How Well Did CINF Perform?

CINF’s trailing twelve-month earnings (from 30 June 2019) of US$1.2b has jumped 32% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 15%, indicating the rate at which CINF is growing has accelerated. How has it been able to do this? Let’s take a look at whether it is only owing to industry tailwinds, or if Cincinnati Financial has experienced some company-specific growth.

NasdaqGS:CINF Income Statement, October 20th 2019
NasdaqGS:CINF Income Statement, October 20th 2019

In terms of returns from investment, Cincinnati Financial has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. However, its return on assets (ROA) of 5.2% exceeds the US Insurance industry of 2.5%, indicating Cincinnati Financial has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Cincinnati Financial’s debt level, has increased over the past 3 years from 5.3% to 6.9%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 13% to 9.0% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Cincinnati Financial to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for CINF’s future growth? Take a look at our free research report of analyst consensus for CINF’s outlook.
  2. Financial Health: Are CINF’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2019. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.