Oxbridge Re Holdings Limited (NASDAQ:OXBR), a USD$14.91M small-cap, is an insurance company operating in an industry, which has recently experienced the impact of a softening commercial lines market and a low-yield investment climate. Financial services analysts are forecasting for the entire industry, a relatively muted growth of 9.61% in the upcoming year , and a whopping growth of 35.31% over the next couple of years. However this rate still came in below the growth rate of the US stock market as a whole. Today, I’ll take you through the sector growth expectations, as well as evaluate whether OXBR is lagging or leading in the industry. See our latest analysis for OXBR
What’s the catalyst for OXBR’s sector growth?
Amid challenges from regulatory disruption, increasing consumer expectations and sluggish sales, insurers will increasingly consider technology integration to drive growth and efficiency. In the past year, the industry delivered negative growth of -2.66%, underperforming the US market growth of 10.30%. OXBR lags the pack with its earnings falling by more than half over the past year, which indicates the company will be growing at a slower pace than its insurance peers. As the company trails the rest of the industry in terms of growth, OXBR may also be a cheaper stock relative to its peers.
Is OXBR and the sector relatively cheap?
Insurance companies are typically trading at a PE of 18x, in-line with the US stock market PE of 22x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 8.00% compared to the market’s 10.06%, potentially indicative of past headwinds. Since OXBR’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge OXBR’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? OXBR has been a insurance industry laggard in the past year. If your initial investment thesis is around the growth prospects of OXBR, there are other insurance companies that have delivered higher growth, and perhaps trading at a discount to the industry average. Consider how OXBR fits into your wider portfolio and the opportunity cost of holding onto the stock.
Are you a potential investor? If OXBR has been on your watchlist for a while, now may be a good time to dig deeper into the stock. Although its growth has delivered lower growth relative to its insurance peers in the near term, the market may be pessimistic on the stock, leading to a potential undervaluation. Before you make a decision on the stock, I suggest you look at OXBR’s future cash flows in order to assess whether the stock is trading at a reasonable price.
For a deeper dive into Oxbridge Re Holdings’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other financial stocks instead? Use our free playform to see my list of over 600 other financial companies trading on the market.
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.