Conifer Holdings Inc's Rocky Road Ahead: Unraveling the Factors Limiting Growth
Long-established in the Insurance industry, Conifer Holdings Inc (NASDAQ:CNFR) has enjoyed a stellar reputation. It has recently witnessed a surge of 11.87%, juxtaposed with a three-month change of -10.24%. However, fresh insights from the GuruFocus Score Rating hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Conifer Holdings Inc.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
1. Financial strength rank: 4/10
2. Profitability rank: 4/10
3. Growth rank: 2/10
4. GF Value rank: 9/10
5. Momentum rank: 4/10
Based on the above method, GuruFocus assigned Conifer Holdings Inc the GF Score of 64 out of 100, which signals poor future outperformance potential.
Understanding Conifer Holdings Inc's Business
Conifer Holdings Inc is an insurance company engaged in the sale of property and casualty insurance products. It operates in three classes of insurance businesses; commercial lines, personal lines, and wholesale agency business. Within these three businesses, the company offers various insurance products and insurance agency services. The company views the commercial and personal lines segments as underwriting business. The wholesale agency business provides non-risk bearing revenue through commissions and policy fees. Its revenues are derived from premiums earned from insurance operations.
Financial Strength Breakdown
Conifer Holdings Inc's financial strength indicators present some concerning insights about the company's balance sheet health. Conifer Holdings Inc has an interest coverage ratio of 0, which positions it worse than 0% of 315 companies in the Insurance industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. It's worth noting that the esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
Additionally, the company's low cash-to-debt ratio at 0.55 indicates a struggle in handling existing debt levels. The company's debt-to-equity ratio is 2.02, which is worse than 94.38% of 356 companies in the Insurance industry. A high debt-to-equity ratio suggests over-reliance on borrowing and vulnerability to market fluctuations.
Profitability Breakdown
Conifer Holdings Inc's low Profitability rank can also raise warning signals. Conifer Holdings Inc's Net Margin has declined over the past five years (1,120.00%), as shown by the following data: 2018: -9.80; 2019: -8.27; 2020: 0.58; 2021: -0.94; 2022: -9.69; .
Growth Prospects
A lack of significant growth is another area where Conifer Holdings Inc seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -1.1 per year over the past three years, which underperforms worse than 69.08% of 456 companies in the Insurance industry. Stagnating revenues may pose concerns in a fast-evolving market. Lastly, Conifer Holdings Inc predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While Conifer Holdings Inc has a rich history in the insurance industry, its current financial indicators suggest a challenging road ahead. Investors should consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article first appeared on GuruFocus.
