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mid-cap

Should You Exit From This Mid-Cap Financials Stock - CNNE

Apr 01, 2022 | Team Kalkine
Should You Exit From This Mid-Cap Financials Stock - CNNE

 

Cannae Holdings, Inc.

Cannae Holdings, Inc. (NYSE: CNNE) principally acquires operating company interests and actively manages and operates a core group of those companies. Its primary assets as of December 31, 2021, include ownership interests in Dun & Bradstreet Holdings, Inc. (D&B), Ceridian HCM Holding, Inc. (Ceridian), Alight, Inc. (Alight), Paysafe Limited (Paysafe), Sightline Payments Holdings, LLC (Sightline), Optimal Blue Holdco, LLC (Optimal Blue), and AmeriLife Group, LLC (AmeriLife); majority equity ownership stakes in O'Charley's Holdings, LLC (O'Charley's) and 99 Restaurants Holdings, LLC (99 Restaurants); and various other controlled portfolio companies and particular minority equity ownership interests.

Why should Investors make an Exit?

  • Industry Lagging Margins: The company reported a slight improvement in gross margins from 17.9% in FY20 to 21.9% in FY21 (ended December 31, 2021). However, its gross margin in FY21 is significantly lower than the industry median of 37.9%. Moreover, company has reported negative EBITDA margin, Operating margin and Net margin implies lackluster financial health.
  • Bottomline Pressure: In its FY21 annual report, the company reported a net loss of USD 286.4 million from a profit of USD 1.76 billion in FY20.
  • Macro-Economic Risks: Sharp volatility in the global financial market, negative price changes in shares and bond holdings, currency risks, talent retention, and other macroeconomic concerns all offer risks to the company.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

CNNE's stock price has remained in a bearish trend throughout the year, fallen 39.16% in the past twelve months and is currently leaning towards the lower end of its 52-week range of USD 22.83 to USD 42.35. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 22.00.

Considering the falling trend of the stock price, industry lagging margins, bottom line stress, macro headwinds, current valuation, other technical indicators, we recommend a "Sell" rating on the stock at the current price of USD 24.17, up 1.05% as of April 01, 2022, at 06:45 AM PDT.

Three-Year Technical Price Chart (as of April 01, 2022, at 6:45 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.