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1.) What approach did the author use ro develop the CNA valuation?

2.) What approach is Jim Cramer ysing to develop the Apple valuation?

3.) Which approach do you believe is stronger/better - the approach used to estimate the value of CNA stock OR the approach used by Jim Cramer addressing Apple valuation and why?

HOME MARKETING, FINANCIAL ARTICLES Jun 22 2018, 12:05 pm EDT What Do CNA's Dividends Say About its Intrinsic Value? By MATT HOGAN Founder For httpbit.ly/21YM CNA Financial Corp (NYSE:CNA) currently pays a dividend yield of 2.6% which is above the Financials sector median of 2.1%. While this makes the total return potential for Cna Financial look attractive, Investors may change their mind when analyzing the company's future dividends. In this article, I calculate Cna Financials fair value by forecasting its dividend distributions and discounting them back to today's value Valuation Methodologies Are Not Made Equally The Dividend Discount Model (DOM) estimates the value of a company's stock price based on the theory that its worth is equal to the sum of the present value of its future dividend payments to shareholders. But how do we know if it's appropriate to use a dividend discount analysis when estimating the fair value of Cna Financial? Many analysts find it difficult when trying to figure out the correct valuation methodology for a given company or are based towards one specific approach. This is often a mistake which can negatively impact investment decisions and result in trading losses or missed opportunities. No two companies are the same and every business consists of unique characteristics that may require you to adjust your analysis. Understanding leverage trends is the first step when determining what valuation analyses are relevant for a given company. When a company's leverage doesn't fluctuate or is expected to remain stable over time, then an equity valuation model (e.g. equity DCF, DDM) will be the most appropriate valuation technique. The reason for this is because when leverage is stable, interest expense on debt can typically be projected with much more reliability, How do we check if a company's leverage has been fluctuating or is expected to do so? This isn't always straightforward but checking recent debt ratio trends can be a good indicator. Cra Financial's debt to equity ratio has been relatively stable over last few years ranging from 21.8% to 23.7%. This suggests that an equity valuation model is a suitable technique when valuing the company's shares. Now does it make sense to use a dividend discount model knowing that an equity valuation technique is an appropriate methodology? The next step is to figure out if Cna Financial pays a dividend and if so, is its payout ratio relatively high (typically above 70%)? The table below highlights this information. Source: Cna Financial dividend discount model Cna Financial distributed a total of $842 million in cash dividends to shareholders in its most recent fiscal year Dec-17 which represented a payout ratio of 93.7%. It appears that the company meets both criteria. Therefore, it is fitting to use a dividend discount model when determining the fair value of Cna Financial stock. Forecasting Cna Financial's Dividends The first step in building a dividend discount model is to forecast net income since forecasting dividends directly can be difficult. So let's create a net income forecast for the next five years and use that as the basis for projecting future dividends. As of June 21, Wall Street analysts are projecting a mediocre growth rate in the company's bottom-line over the next five years. Net income is expected to reach $1,413 million by fiscal year 2022. Source: Cna Financial Projected Net Income Growth I use the net income projections above to serve as the basis for my dividend forecast. The next step is to forecast the payout ratio where I selected 90.0% for the next fiscal year which is in line with historical levels. Source: Cna Financial dividend discount model Calculating Cna Financial's Fair Value 7/11/2018 What Do CNA's Dividends Say About its intrinsic Value? Investor Place The last step is to select a discount rate to calculate the present value of the forecasted dividends. I used finbox.lo's Weighted Average Cost of Capital (WACC) model to help arrive at an estimate for the company's cost of equity. I determined a reasonable discount rate for Cna Financial to be 9.6% at the midpoint. An updated cost of capital analysis using real-time data can be found at finbox.io's Cna Financial WACC model page. The assumptions used in the dividend discount model calculate a fair value per share for Cna Financial of $48.23, 4.2% above its current stock price. As a result, investors may conclude that they want to hold off on purchasing shares until the stock develops a wider margin of safety. Conclusion: Dividends Support Stock Price Discovering the fair value of a company can sometimes be difficult. However, determining an appropriate valuation methodology should not be. Knowing when and when not to use the dividend discount model will help in your investment decision making process. However, it's important to understand that a dividend discount model will inherently undervalue a stock. This is typically the result of the payout ratio assumption being less than 100% implying some cash leakage. Meaning the approach does not capture value that would otherwise build up as cash on the balance sheet. In practice, this excess retained cash is usually paid out to shareholders as special dividends or to make up for cash shortfalls for future dividends during economic downturns. Understanding that this approach calculates a conservative fair value estimate may be a promising sign for investors looking to purchase shares or add to an existing position. Since CNA looks to be trading near its intrinsic value based on the analysis above, this could actually represent a 'downside' case meaning an upside' case could have a much larger margin of safety. Note that there are a number of fundamental factors I have not considered in this analysis. I recommend that you continue your research on Cna Financial to gain a better understanding of its future prospects. As of this writing, Matt Hogan did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned. Matt Hogan is also a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing faimess opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset's fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock. His work is frequently published at InvestorPlace, Benzinga, ValueWalk, All, Barron's, Seeking Alpha and investing.com Matt can be reached at [email protected]. 10 TECH STOCKS THAT WILL TRIPLE SPONSORED CONTENT ON INVESTORPLACE Why 70% of Option Traders FAIL Cramer says Apple's stock could have a $300 price target if it were only valued properly Apple deserves to trade like a consumer products company, not a technology stock, CNBC's Jim Cramer says. If Apple was valued as CNBC's Jim Cramer sees it - "the greatest consumer products company in history" -- the stock's price target would be $300 a share, the "Mad Money" host said Tuesday. Speaking after Apple reported a third-quarter earnings beat driven by continued strength in its service stream revenue, which grew 31 percent since last year, Cramer again made the case for the company's budding razor-razorblade model. "Given the rapid growth of that service stream, this company deserves to sell at a priceto-earnings ratio that is more like a consumer packaged goods company," he said as Apple's stock popped more than 3 percent in after-hours trading. Cramer lamented the fact that Apple is valued like a sturdy, cyclical industrial at just over 17 times next year's earnings estimates. Instead, he said, it should be on par with top consumer goods stocks, which tend to trade at mid-20s multiples. "In fact, (Apple) should be covered by the same analysts that cover a Procter & Gamble, a Clorox, a PepsiCo, a Colgate, because if it were, I could argue it should be valued at well north of $280 instead of about $200, where it is right now, the "Mad Money" host said. He added that if he were running the research department at a top Wall Street firm, he would take Apple off the technology analysts' tists tonight and tell the consumer products researchers to begin covering the stock. "The organic growth of these so-called steady-eddie companies is nowhere near that of Apple," he said of the consumer packaged goods plays. "The cash return to shareholders is nowhere near that of Apple. The brand loyalty is nowhere near that of Apple. The worldwide pervasiveness is fractional versus Apple. "That's how I could explain how the stock should have a $300 target, not a 5200 target, which I think it'll eclipse tomorrow," he continued. So as investors digest Apple's eamings win, Cramer told his viewers not to panic if they don't own shares of the iPhone maker. "You do not want to give Jeff Bezos a seven-year head start." Hear what else Buffett has to say "No, it is not too late to own Apple," the "Mad Money" host said. "Apple the tech stock maybe, but Apple the consumer products company? That deserves to trade so much higher. Let's just say own it, don't trade it, and buy it if you don't HOME MARKETING, FINANCIAL ARTICLES Jun 22 2018, 12:05 pm EDT What Do CNA's Dividends Say About its Intrinsic Value? By MATT HOGAN Founder For httpbit.ly/21YM CNA Financial Corp (NYSE:CNA) currently pays a dividend yield of 2.6% which is above the Financials sector median of 2.1%. While this makes the total return potential for Cna Financial look attractive, Investors may change their mind when analyzing the company's future dividends. In this article, I calculate Cna Financials fair value by forecasting its dividend distributions and discounting them back to today's value Valuation Methodologies Are Not Made Equally The Dividend Discount Model (DOM) estimates the value of a company's stock price based on the theory that its worth is equal to the sum of the present value of its future dividend payments to shareholders. But how do we know if it's appropriate to use a dividend discount analysis when estimating the fair value of Cna Financial? Many analysts find it difficult when trying to figure out the correct valuation methodology for a given company or are based towards one specific approach. This is often a mistake which can negatively impact investment decisions and result in trading losses or missed opportunities. No two companies are the same and every business consists of unique characteristics that may require you to adjust your analysis. Understanding leverage trends is the first step when determining what valuation analyses are relevant for a given company. When a company's leverage doesn't fluctuate or is expected to remain stable over time, then an equity valuation model (e.g. equity DCF, DDM) will be the most appropriate valuation technique. The reason for this is because when leverage is stable, interest expense on debt can typically be projected with much more reliability, How do we check if a company's leverage has been fluctuating or is expected to do so? This isn't always straightforward but checking recent debt ratio trends can be a good indicator. Cra Financial's debt to equity ratio has been relatively stable over last few years ranging from 21.8% to 23.7%. This suggests that an equity valuation model is a suitable technique when valuing the company's shares. Now does it make sense to use a dividend discount model knowing that an equity valuation technique is an appropriate methodology? The next step is to figure out if Cna Financial pays a dividend and if so, is its payout ratio relatively high (typically above 70%)? The table below highlights this information. Source: Cna Financial dividend discount model Cna Financial distributed a total of $842 million in cash dividends to shareholders in its most recent fiscal year Dec-17 which represented a payout ratio of 93.7%. It appears that the company meets both criteria. Therefore, it is fitting to use a dividend discount model when determining the fair value of Cna Financial stock. Forecasting Cna Financial's Dividends The first step in building a dividend discount model is to forecast net income since forecasting dividends directly can be difficult. So let's create a net income forecast for the next five years and use that as the basis for projecting future dividends. As of June 21, Wall Street analysts are projecting a mediocre growth rate in the company's bottom-line over the next five years. Net income is expected to reach $1,413 million by fiscal year 2022. Source: Cna Financial Projected Net Income Growth I use the net income projections above to serve as the basis for my dividend forecast. The next step is to forecast the payout ratio where I selected 90.0% for the next fiscal year which is in line with historical levels. Source: Cna Financial dividend discount model Calculating Cna Financial's Fair Value 7/11/2018 What Do CNA's Dividends Say About its intrinsic Value? Investor Place The last step is to select a discount rate to calculate the present value of the forecasted dividends. I used finbox.lo's Weighted Average Cost of Capital (WACC) model to help arrive at an estimate for the company's cost of equity. I determined a reasonable discount rate for Cna Financial to be 9.6% at the midpoint. An updated cost of capital analysis using real-time data can be found at finbox.io's Cna Financial WACC model page. The assumptions used in the dividend discount model calculate a fair value per share for Cna Financial of $48.23, 4.2% above its current stock price. As a result, investors may conclude that they want to hold off on purchasing shares until the stock develops a wider margin of safety. Conclusion: Dividends Support Stock Price Discovering the fair value of a company can sometimes be difficult. However, determining an appropriate valuation methodology should not be. Knowing when and when not to use the dividend discount model will help in your investment decision making process. However, it's important to understand that a dividend discount model will inherently undervalue a stock. This is typically the result of the payout ratio assumption being less than 100% implying some cash leakage. Meaning the approach does not capture value that would otherwise build up as cash on the balance sheet. In practice, this excess retained cash is usually paid out to shareholders as special dividends or to make up for cash shortfalls for future dividends during economic downturns. Understanding that this approach calculates a conservative fair value estimate may be a promising sign for investors looking to purchase shares or add to an existing position. Since CNA looks to be trading near its intrinsic value based on the analysis above, this could actually represent a 'downside' case meaning an upside' case could have a much larger margin of safety. Note that there are a number of fundamental factors I have not considered in this analysis. I recommend that you continue your research on Cna Financial to gain a better understanding of its future prospects. As of this writing, Matt Hogan did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned. Matt Hogan is also a co-founder of finbox.io. His expertise is in investment decision making. Prior to finbox.io, Matt worked for an investment banking group providing faimess opinions in connection to stock acquisitions. He spent much of his time building valuation models to help clients determine an asset's fair value. He believes that these same valuation models should be used by all investors before buying or selling a stock. His work is frequently published at InvestorPlace, Benzinga, ValueWalk, All, Barron's, Seeking Alpha and investing.com Matt can be reached at [email protected]. 10 TECH STOCKS THAT WILL TRIPLE SPONSORED CONTENT ON INVESTORPLACE Why 70% of Option Traders FAIL Cramer says Apple's stock could have a $300 price target if it were only valued properly Apple deserves to trade like a consumer products company, not a technology stock, CNBC's Jim Cramer says. If Apple was valued as CNBC's Jim Cramer sees it - "the greatest consumer products company in history" -- the stock's price target would be $300 a share, the "Mad Money" host said Tuesday. Speaking after Apple reported a third-quarter earnings beat driven by continued strength in its service stream revenue, which grew 31 percent since last year, Cramer again made the case for the company's budding razor-razorblade model. "Given the rapid growth of that service stream, this company deserves to sell at a priceto-earnings ratio that is more like a consumer packaged goods company," he said as Apple's stock popped more than 3 percent in after-hours trading. Cramer lamented the fact that Apple is valued like a sturdy, cyclical industrial at just over 17 times next year's earnings estimates. Instead, he said, it should be on par with top consumer goods stocks, which tend to trade at mid-20s multiples. "In fact, (Apple) should be covered by the same analysts that cover a Procter & Gamble, a Clorox, a PepsiCo, a Colgate, because if it were, I could argue it should be valued at well north of $280 instead of about $200, where it is right now, the "Mad Money" host said. He added that if he were running the research department at a top Wall Street firm, he would take Apple off the technology analysts' tists tonight and tell the consumer products researchers to begin covering the stock. "The organic growth of these so-called steady-eddie companies is nowhere near that of Apple," he said of the consumer packaged goods plays. "The cash return to shareholders is nowhere near that of Apple. The brand loyalty is nowhere near that of Apple. The worldwide pervasiveness is fractional versus Apple. "That's how I could explain how the stock should have a $300 target, not a 5200 target, which I think it'll eclipse tomorrow," he continued. So as investors digest Apple's eamings win, Cramer told his viewers not to panic if they don't own shares of the iPhone maker. "You do not want to give Jeff Bezos a seven-year head start." Hear what else Buffett has to say "No, it is not too late to own Apple," the "Mad Money" host said. "Apple the tech stock maybe, but Apple the consumer products company? That deserves to trade so much higher. Let's just say own it, don't trade it, and buy it if you don't

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