What is CINF's Intrinsic value?

Cincinnati Financial Corp (CINF) Intrinsic Value Analysis

Executive Summary

As of June 4, 2025, Cincinnati Financial Corp's estimated intrinsic value ranges from $118.99 to $185.30 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $185.30 +22.3%
Dividend Discount Model (Stable) $118.99 -21.5%

Is Cincinnati Financial Corp (CINF) undervalued or overvalued?

With the current market price at $151.51, the stock appears to be fairly valued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Cincinnati Financial Corp's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.63 0.67
Cost of equity 6.8% 8.6%
Cost of debt 5.0% 5.0%
Tax rate 19.4% 19.8%
Debt/Equity ratio 0.04 0.04
After-tax WACC 6.7% 8.5%

Valuation Methods

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 34.5%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.7%
  • Long-term growth rate: 1.0%
  • Fair value: $185.30 (22.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.6% (Low) to 6.8% (High)
  • Long-term growth rate: 0.5% (Low) to 1.5% (High)
  • Fair value range: $80 to $158
  • Selected fair value: $118.99 (-21.5% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $23681M
Enterprise Value $23486M
Trailing P/E 16.37
Forward P/E 10.13
Trailing EV/EBITDA 0.00
Current Dividend Yield 211.68%
Dividend Growth Rate (5Y) 6.92%
Debt-to-Equity Ratio 0.03

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Dividend Discount Model (Multi-Stage) 57% $37.06
Dividend Discount Model (Stable) 43% $17.85
Weighted Average 100% $156.88

Investment Conclusion

Based on our comprehensive valuation analysis, Cincinnati Financial Corp's weighted average intrinsic value is $156.88, which is approximately 3.5% above the current market price of $151.51.

Key investment considerations:

  • Conservative capital structure (Debt/Equity of 0.03)
  • Historical dividend growth of 6.92%

Given these factors, we believe Cincinnati Financial Corp is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.