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I've been keeping an eye on National General Holdings Corp. (NASDAQ:NGHC) because I'm attracted to its fundamentals. Looking at the company as a whole, as a potential stock investment, I believe NGHC has a lot to offer. Basically, it is a financially-healthy company with a a strong track record of performance, trading at a great value. Below is a brief commentary on these key aspects. For those interested in digger a bit deeper into my commentary, read the full report on National General Holdings here.
Undervalued with solid track record
NGHC delivered a bottom-line expansion of 88% in the prior year, with its most recent earnings level surpassing its average level over the last five years. Not only did NGHC outperformed its past performance, its growth also exceeded the Insurance industry expansion, which generated a 6.6% earnings growth. This paints a buoyant picture for the company. With a debt-to-equity ratio of 30%, NGHC’s debt level is acceptable. This indicates a good balance between taking advantage of low cost funding through debt financing, but having enough financial flexibility and headroom to grow debt in the future. NGHC's has produced operating cash levels of 0.93x total debt over the past year, which implies that NGHC's management has put its borrowings into good use by generating enough cash to cover a sufficient portion of borrowings.
NGHC's shares are now trading at a price below its true value based on its discounted cash flows, indicating a relatively pessimistic market sentiment. Investors have the opportunity to buy into the stock to reap capital gains, if NGHC's projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company. Compared to the rest of the insurance industry, NGHC is also trading below its peers, relative to earnings generated. This supports the theory that NGHC is potentially underpriced.
For National General Holdings, there are three key factors you should look at:
- Future Outlook: What are well-informed industry analysts predicting for NGHC’s future growth? Take a look at our free research report of analyst consensus for NGHC’s outlook.
- Dividend Income vs Capital Gains: Does NGHC return gains to shareholders through reinvesting in itself and growing earnings, or redistribute a decent portion of earnings as dividends? Our historical dividend yield visualization quickly tells you what your can expect from NGHC as an investment.
- Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of NGHC? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.