Stock Analysis

Subdued Growth No Barrier To CNO Financial Group, Inc.'s (NYSE:CNO) Price

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There wouldn't be many who think CNO Financial Group, Inc.'s (NYSE:CNO) price-to-sales (or "P/S") ratio of 0.8x is worth a mention when the median P/S for the Insurance industry in the United States is similar at about 1x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

Check out our latest analysis for CNO Financial Group

NYSE:CNO Price to Sales Ratio vs Industry January 8th 2024

What Does CNO Financial Group's P/S Mean For Shareholders?

Recent times haven't been great for CNO Financial Group as its revenue has been rising slower than most other companies. One possibility is that the P/S ratio is moderate because investors think this lacklustre revenue performance will turn around. However, if this isn't the case, investors might get caught out paying too much for the stock.

Want the full picture on analyst estimates for the company? Then our free report on CNO Financial Group will help you uncover what's on the horizon.

Do Revenue Forecasts Match The P/S Ratio?

There's an inherent assumption that a company should be matching the industry for P/S ratios like CNO Financial Group's to be considered reasonable.

If we review the last year of revenue growth, the company posted a worthy increase of 7.4%. However, due to its less than impressive performance prior to this period, revenue growth is practically non-existent over the last three years overall. So it appears to us that the company has had a mixed result in terms of growing revenue over that time.

Turning to the outlook, the next three years should generate growth of 0.5% each year as estimated by the five analysts watching the company. That's shaping up to be materially lower than the 4.3% per annum growth forecast for the broader industry.

With this in mind, we find it intriguing that CNO Financial Group's P/S is closely matching its industry peers. It seems most investors are ignoring the fairly limited growth expectations and are willing to pay up for exposure to the stock. Maintaining these prices will be difficult to achieve as this level of revenue growth is likely to weigh down the shares eventually.

What We Can Learn From CNO Financial Group's P/S?

We'd say the price-to-sales ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our look at the analysts forecasts of CNO Financial Group's revenue prospects has shown that its inferior revenue outlook isn't negatively impacting its P/S as much as we would have predicted. At present, we aren't confident in the P/S as the predicted future revenues aren't likely to support a more positive sentiment for long. This places shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

You should always think about risks. Case in point, we've spotted 3 warning signs for CNO Financial Group you should be aware of, and 1 of them is concerning.

If these risks are making you reconsider your opinion on CNO Financial Group, explore our interactive list of high quality stocks to get an idea of what else is out there.

Valuation is complex, but we're helping make it simple.

Find out whether CNO Financial Group is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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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.


CNO Financial Group

CNO Financial Group, Inc., through its subsidiaries, develops, markets, and administers health insurance, annuity, individual life insurance, insurance products, and financial services for senior and middle-income markets in the United States.

Established dividend payer and good value.