NEW YORK (
-- Cincinnati Financial Corporation
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, weak operating cash flow and poor profit margins.
Highlights from the ratings report include:
- CINCINNATI FINANCIAL CORP's earnings per share declined by 9.5% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, CINCINNATI FINANCIAL CORP reported lower earnings of $2.31 versus $2.65 in the prior year. For the next year, the market is expecting a contraction of 65.4% in earnings ($0.80 versus $2.31).
- Net operating cash flow has decreased to $57.00 million or 48.18% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
- CINF's debt-to-equity ratio is very low at 0.16 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- Despite its growing revenue, the company underperformed as compared with the industry average of 8.6%. Since the same quarter one year prior, revenues slightly increased by 4.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
Cincinnati Financial Corporation, through its subsidiaries, operates in the property casualty insurance business in the United States. It operates in four segments: Commercial Lines Property Casualty Insurance, Personal Lines Property Casualty Insurance, Life Insurance, and Investment. The company has a P/E ratio of 13.3, equal to the average insurance industry P/E ratio and below the S&P 500 P/E ratio of 17.7. Cincinnati Financial has a market cap of $4.9 billion and is part of the
industry. Shares are down 5.6% year to date as of the close of trading on Wednesday.
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