Intrinsic value of Cincinnati Financial - CINF

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$69.91

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$69.91

 
Intrinsic value

$127.74

 
Up/down potential

+83%

 
Rating

str. buy

 
Value-price divergence* premium content

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Our model is not good at valuating stocks of financial companies, such as CINF.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of CINF stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 11.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  5.97
  11.70
  11.03
  10.43
  9.88
  9.40
  8.96
  8.56
  8.20
  7.88
  7.60
  7.34
  7.10
  6.89
  6.70
  6.53
  6.38
  6.24
  6.12
  6.01
  5.91
  5.81
  5.73
  5.66
  5.59
  5.53
  5.48
  5.43
  5.39
  5.35
  5.32
Revenue, $m
  0
  6,087
  6,758
  7,463
  8,200
  8,971
  9,774
  10,611
  11,481
  12,387
  13,327
  14,305
  15,321
  16,377
  17,475
  18,616
  19,804
  21,040
  22,327
  23,668
  25,066
  26,523
  28,044
  29,631
  31,289
  33,020
  34,830
  36,722
  38,702
  40,772
  42,940
Variable operating expenses, $m
 
  4,979
  5,528
  6,104
  6,708
  7,338
  7,995
  8,680
  9,392
  10,132
  10,902
  11,702
  12,533
  13,396
  14,294
  15,228
  16,200
  17,211
  18,264
  19,361
  20,504
  21,696
  22,940
  24,238
  25,594
  27,011
  28,491
  30,039
  31,658
  33,352
  35,125
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  4,584
  4,979
  5,528
  6,104
  6,708
  7,338
  7,995
  8,680
  9,392
  10,132
  10,902
  11,702
  12,533
  13,396
  14,294
  15,228
  16,200
  17,211
  18,264
  19,361
  20,504
  21,696
  22,940
  24,238
  25,594
  27,011
  28,491
  30,039
  31,658
  33,352
  35,125
Operating income, $m
  865
  1,108
  1,230
  1,358
  1,492
  1,633
  1,779
  1,931
  2,090
  2,254
  2,426
  2,604
  2,788
  2,981
  3,180
  3,388
  3,604
  3,829
  4,064
  4,308
  4,562
  4,827
  5,104
  5,393
  5,695
  6,010
  6,339
  6,683
  7,044
  7,421
  7,815
EBITDA, $m
  913
  1,149
  1,276
  1,409
  1,548
  1,694
  1,845
  2,003
  2,168
  2,339
  2,516
  2,701
  2,893
  3,092
  3,299
  3,515
  3,739
  3,972
  4,215
  4,469
  4,732
  5,008
  5,295
  5,594
  5,907
  6,234
  6,576
  6,933
  7,307
  7,698
  8,107
Interest expense (income), $m
  52
  52
  148
  248
  354
  464
  579
  699
  824
  954
  1,089
  1,230
  1,376
  1,528
  1,686
  1,850
  2,020
  2,198
  2,382
  2,575
  2,775
  2,984
  3,202
  3,429
  3,666
  3,914
  4,172
  4,443
  4,726
  5,021
  5,331
Earnings before tax, $m
  812
  1,056
  1,082
  1,110
  1,139
  1,169
  1,200
  1,232
  1,265
  1,300
  1,336
  1,373
  1,412
  1,453
  1,495
  1,538
  1,584
  1,632
  1,681
  1,733
  1,787
  1,843
  1,902
  1,964
  2,028
  2,096
  2,167
  2,241
  2,318
  2,399
  2,484
Tax expense, $m
  221
  285
  292
  300
  307
  316
  324
  333
  342
  351
  361
  371
  381
  392
  404
  415
  428
  441
  454
  468
  482
  498
  514
  530
  548
  566
  585
  605
  626
  648
  671
Net income, $m
  591
  771
  790
  810
  831
  853
  876
  899
  924
  949
  975
  1,003
  1,031
  1,060
  1,091
  1,123
  1,156
  1,191
  1,227
  1,265
  1,304
  1,346
  1,389
  1,434
  1,481
  1,530
  1,582
  1,636
  1,692
  1,751
  1,814

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  20,386
  22,796
  25,310
  27,950
  30,712
  33,598
  36,607
  39,741
  43,001
  46,392
  49,915
  53,577
  57,383
  61,337
  65,449
  69,725
  74,173
  78,802
  83,623
  88,645
  93,879
  99,338
  105,033
  110,978
  117,186
  123,671
  130,450
  137,537
  144,950
  152,705
  160,823
Adjusted assets (=assets-cash), $m
  20,386
  22,796
  25,310
  27,950
  30,712
  33,598
  36,607
  39,741
  43,001
  46,392
  49,915
  53,577
  57,383
  61,337
  65,449
  69,725
  74,173
  78,802
  83,623
  88,645
  93,879
  99,338
  105,033
  110,978
  117,186
  123,671
  130,450
  137,537
  144,950
  152,705
  160,823
Revenue / Adjusted assets
  0.000
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
  0.267
Average production assets, $m
  184
  207
  230
  254
  279
  305
  332
  361
  390
  421
  453
  486
  521
  557
  594
  633
  673
  715
  759
  805
  852
  902
  953
  1,007
  1,064
  1,123
  1,184
  1,249
  1,316
  1,386
  1,460
Working capital, $m
  0
  24
  27
  30
  33
  36
  39
  42
  46
  50
  53
  57
  61
  66
  70
  74
  79
  84
  89
  95
  100
  106
  112
  119
  125
  132
  139
  147
  155
  163
  172
Total debt, $m
  846
  2,429
  4,073
  5,799
  7,606
  9,493
  11,461
  13,510
  15,643
  17,860
  20,165
  22,559
  25,048
  27,635
  30,324
  33,120
  36,029
  39,057
  42,209
  45,494
  48,917
  52,487
  56,212
  60,100
  64,159
  68,401
  72,834
  77,469
  82,317
  87,389
  92,698
Total liabilities, $m
  13,326
  14,909
  16,553
  18,279
  20,086
  21,973
  23,941
  25,990
  28,123
  30,340
  32,645
  35,039
  37,528
  40,115
  42,804
  45,600
  48,509
  51,537
  54,689
  57,974
  61,397
  64,967
  68,692
  72,580
  76,639
  80,881
  85,314
  89,949
  94,797
  99,869
  105,178
Total equity, $m
  7,060
  7,887
  8,757
  9,671
  10,626
  11,625
  12,666
  13,750
  14,878
  16,051
  17,271
  18,538
  19,854
  21,223
  22,645
  24,125
  25,664
  27,266
  28,933
  30,671
  32,482
  34,371
  36,341
  38,398
  40,546
  42,790
  45,136
  47,588
  50,153
  52,836
  55,645
Total liabilities and equity, $m
  20,386
  22,796
  25,310
  27,950
  30,712
  33,598
  36,607
  39,740
  43,001
  46,391
  49,916
  53,577
  57,382
  61,338
  65,449
  69,725
  74,173
  78,803
  83,622
  88,645
  93,879
  99,338
  105,033
  110,978
  117,185
  123,671
  130,450
  137,537
  144,950
  152,705
  160,823
Debt-to-equity ratio
  0.120
  0.310
  0.470
  0.600
  0.720
  0.820
  0.900
  0.980
  1.050
  1.110
  1.170
  1.220
  1.260
  1.300
  1.340
  1.370
  1.400
  1.430
  1.460
  1.480
  1.510
  1.530
  1.550
  1.570
  1.580
  1.600
  1.610
  1.630
  1.640
  1.650
  1.670
Adjusted equity ratio
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346
  0.346

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  591
  771
  790
  810
  831
  853
  876
  899
  924
  949
  975
  1,003
  1,031
  1,060
  1,091
  1,123
  1,156
  1,191
  1,227
  1,265
  1,304
  1,346
  1,389
  1,434
  1,481
  1,530
  1,582
  1,636
  1,692
  1,751
  1,814
Depreciation, amort., depletion, $m
  48
  41
  46
  51
  56
  61
  66
  72
  78
  84
  91
  97
  104
  111
  119
  127
  135
  143
  152
  161
  170
  180
  191
  201
  213
  225
  237
  250
  263
  277
  292
Funds from operations, $m
  1,458
  812
  836
  861
  887
  914
  942
  972
  1,002
  1,033
  1,066
  1,100
  1,135
  1,172
  1,210
  1,250
  1,291
  1,334
  1,379
  1,426
  1,475
  1,526
  1,579
  1,635
  1,694
  1,755
  1,818
  1,885
  1,955
  2,029
  2,106
Change in working capital, $m
  355
  3
  3
  3
  3
  3
  3
  3
  3
  4
  4
  4
  4
  4
  4
  5
  5
  5
  5
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
Cash from operations, $m
  1,103
  809
  833
  858
  884
  911
  939
  968
  998
  1,030
  1,062
  1,096
  1,131
  1,168
  1,206
  1,245
  1,286
  1,329
  1,374
  1,421
  1,469
  1,520
  1,573
  1,629
  1,687
  1,748
  1,811
  1,878
  1,947
  2,020
  2,097
Maintenance CAPEX, $m
  0
  -37
  -41
  -46
  -51
  -56
  -61
  -66
  -72
  -78
  -84
  -91
  -97
  -104
  -111
  -119
  -127
  -135
  -143
  -152
  -161
  -170
  -180
  -191
  -201
  -213
  -225
  -237
  -250
  -263
  -277
New CAPEX, $m
  -13
  -23
  -23
  -24
  -25
  -26
  -27
  -28
  -30
  -31
  -32
  -33
  -35
  -36
  -37
  -39
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -56
  -59
  -62
  -64
  -67
  -70
  -74
Cash from investing activities, $m
  -456
  -60
  -64
  -70
  -76
  -82
  -88
  -94
  -102
  -109
  -116
  -124
  -132
  -140
  -148
  -158
  -167
  -177
  -187
  -198
  -209
  -220
  -232
  -245
  -257
  -272
  -287
  -301
  -317
  -333
  -351
Free cash flow, $m
  647
  749
  769
  788
  808
  829
  851
  873
  897
  921
  946
  972
  999
  1,028
  1,057
  1,087
  1,119
  1,152
  1,187
  1,223
  1,261
  1,300
  1,341
  1,384
  1,429
  1,476
  1,525
  1,577
  1,630
  1,687
  1,746
Issuance/(repayment) of debt, $m
  -15
  1,583
  1,644
  1,726
  1,807
  1,887
  1,968
  2,049
  2,132
  2,217
  2,305
  2,395
  2,489
  2,587
  2,689
  2,796
  2,909
  3,028
  3,153
  3,284
  3,423
  3,570
  3,725
  3,888
  4,060
  4,242
  4,433
  4,635
  4,848
  5,072
  5,309
Issuance/(repurchase) of shares, $m
  -18
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -108
  1,583
  1,644
  1,726
  1,807
  1,887
  1,968
  2,049
  2,132
  2,217
  2,305
  2,395
  2,489
  2,587
  2,689
  2,796
  2,909
  3,028
  3,153
  3,284
  3,423
  3,570
  3,725
  3,888
  4,060
  4,242
  4,433
  4,635
  4,848
  5,072
  5,309
Total cash flow (excl. dividends), $m
  539
  2,332
  2,413
  2,514
  2,615
  2,716
  2,819
  2,923
  3,029
  3,138
  3,251
  3,367
  3,488
  3,614
  3,746
  3,884
  4,028
  4,180
  4,340
  4,508
  4,684
  4,870
  5,066
  5,272
  5,489
  5,718
  5,958
  6,212
  6,478
  6,759
  7,055
Retained Cash Flow (-), $m
  -633
  -827
  -870
  -913
  -956
  -998
  -1,041
  -1,084
  -1,128
  -1,173
  -1,219
  -1,267
  -1,317
  -1,368
  -1,423
  -1,479
  -1,539
  -1,602
  -1,668
  -1,738
  -1,811
  -1,889
  -1,971
  -2,057
  -2,148
  -2,244
  -2,345
  -2,452
  -2,565
  -2,683
  -2,809
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  1,504
  1,543
  1,601
  1,659
  1,718
  1,778
  1,838
  1,901
  1,965
  2,031
  2,100
  2,171
  2,246
  2,323
  2,404
  2,489
  2,578
  2,672
  2,770
  2,873
  2,981
  3,095
  3,215
  3,341
  3,474
  3,613
  3,759
  3,914
  4,076
  4,246
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  1,442
  1,413
  1,393
  1,366
  1,332
  1,290
  1,242
  1,188
  1,129
  1,065
  997
  927
  854
  780
  706
  633
  561
  492
  426
  365
  308
  257
  211
  170
  135
  105
  81
  61
  44
  32
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Cincinnati Financial Corporation engages in the property casualty insurance business in the United States. It operates through five segments: Commercial Lines Insurance, Personal Lines Insurance, Excess and Surplus Lines Insurance, Life Insurance, and Investments. The Commercial Lines Insurance segment provides coverage for commercial casualty, commercial property, commercial auto, and workersÂ’ compensation. This segment also offers director and officer liability insurance, contract and commercial surety bonds, and fidelity bonds; and machinery and equipment coverage, as well as coverage for property, liability, and business interruption. The Personal Lines Insurance segment provides personal auto and homeowners insurance, as well as dwelling fire, inland marine, personal umbrella liability, and watercraft coverages to individuals. The Excess and Surplus Lines Insurance segment offers commercial casualty insurance that covers businesses for third-party liability from accidents occurring on their premises or arising out of their operations, such as injuries sustained from products; and commercial property insurance, which insures buildings, inventory, equipment, and business income against loss or damage from fire, wind, hail, water, theft, and vandalism. The Life Insurance segment provides term life insurance products; universal life insurance products; worksite products, including term, whole life, universal life, and disability insurance offered to employees through their employer; and whole life insurance products, as well as markets disability income insurance, deferred annuities, and immediate annuities. The Investments segment invests in publicly traded fixed-maturity, equity, and short-term investments. The company also offers commercial leasing and financing services. Cincinnati Financial Corporation was founded in 1950 and is headquartered in Fairfield, Ohio.

FINANCIAL RATIOS  of  Cincinnati Financial (CINF)

Valuation Ratios
P/E Ratio 19.4
Price to Sales 2.1
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 10.4
Price to Free Cash Flow 10.5
Growth Rates
Sales Growth Rate 6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 30%
Cap. Spend. - 3 Yr. Gr. Rate 13.2%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 11.7%
Total Debt to Equity 12%
Interest Coverage 17
Management Effectiveness
Return On Assets 3.2%
Ret/ On Assets - 3 Yr. Avg. 3.3%
Return On Total Capital 7.8%
Ret/ On T. Cap. - 3 Yr. Avg. 7.9%
Return On Equity 8.8%
Return On Equity - 3 Yr. Avg. 8.9%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 16.7%
EBITDA Margin - 3 Yr. Avg. 17.5%
Operating Margin 15.9%
Oper. Margin - 3 Yr. Avg. 16.6%
Pre-Tax Margin 14.9%
Pre-Tax Margin - 3 Yr. Avg. 15.5%
Net Profit Margin 10.8%
Net Profit Margin - 3 Yr. Avg. 11.3%
Effective Tax Rate 27.2%
Eff/ Tax Rate - 3 Yr. Avg. 27.5%
Payout Ratio 51.8%

CINF stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the CINF stock intrinsic value calculation we used $5449 million for the last fiscal year's total revenue generated by Cincinnati Financial. The default revenue input number comes from 2016 income statement of Cincinnati Financial. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our CINF stock valuation model: a) initial revenue growth rate of 11.7% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for CINF is calculated based on our internal credit rating of Cincinnati Financial, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Cincinnati Financial.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of CINF stock the variable cost ratio is equal to 81.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for CINF stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 6.1% for Cincinnati Financial.

Corporate tax rate of 27% is the nominal tax rate for Cincinnati Financial. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the CINF stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for CINF are equal to 3.4%.

Life of production assets of 3.8 years is the average useful life of capital assets used in Cincinnati Financial operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for CINF is equal to 0.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $7060 million for Cincinnati Financial - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 164.94 million for Cincinnati Financial is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Cincinnati Financial at the current share price and the inputted number of shares is $11.5 billion.


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COMPANY NEWS

▶ S&P Dividend Aristocrats: Which Stocks Make the List?   [May-05-17 07:20AM  Motley Fool]
▶ Seven Greater Cincinnati public companies land among nations biggest on new list   [May-03-17 04:18PM  American City Business Journals]
▶ Cincinnati Financial posts 1Q profit   [Apr-26-17 04:34PM  Associated Press]
▶ Cincinnatis most valuable CEOs pay doubles   [Apr-04-17 03:32PM  American City Business Journals]
▶ What You Need to Know About the March Rate Hike   [Mar-20-17 04:13PM  GuruFocus.com]
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▶ The Biggest Loser: Cincinnati Financial Tumbled 6.7%   [Jan-12-17 04:25PM  at Barrons.com]
▶ Do Hedge Funds Love Cincinnati Financial Corporation (CINF)?   [Dec-02-16 08:55AM  at Insider Monkey]
Stock chart of CINF Financial statements of CINF Annual reports of CINF
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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