HCI Group Inc (NYSE:HCI), a insurance company based in United States, received a lot of attention from a substantial price increase on the NYSE over the last few months. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s take a look at HCI Group’s outlook and value based on the most recent financial data to see if the opportunity still exists. View our latest analysis for HCI Group
What is HCI Group worth?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-book ratio in this instance because there’s not enough visibility to forecast its cash flows, and its earnings doesn’t seem to reflect its true value. The stock’s ratio of 1.72x is currently trading slightly above its industry peers’ ratio of 1.36x, which means if you buy HCI Group today, you’d be paying a relatively reasonable price for it. And if you believe that HCI Group should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because HCI Group’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will HCI Group generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, with a relatively muted revenue growth of 7.26% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for HCI Group, at least in the short term.
What this means for you:
Are you a shareholder? It seems like the market has already priced in HCI’s growth outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at HCI? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on HCI, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on HCI Group. You can find everything you need to know about HCI Group in the latest infographic research report. If you are no longer interested in HCI Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.