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Universal Insurance Holdings, Inc. (NYSE:UVE): Poised For Long-Term Success?

Simply Wall St

Universal Insurance Holdings, Inc.'s (NYSE:UVE) announced its latest earnings update in December 2018, which confirmed that the business benefited from a slight tailwind, leading to a single-digit earnings growth of 9.5%. Below is a brief commentary on my key takeaways on how market analysts view Universal Insurance Holdings's earnings growth trajectory over the next few years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.

See our latest analysis for Universal Insurance Holdings

Market analysts' prospects for the coming year seems pessimistic, with earnings falling by -8.6%. But in the following year, there is a complete contrast in performance, with arriving at double digit 5.8% compared to today’s level and continues to increase to US$141m in 2022.

NYSE:UVE Past and Future Earnings, April 21st 2019

While it’s helpful to understand the growth each year relative to today’s level, it may be more insightful estimating the rate at which the company is growing every year, on average. The pro of this technique is that we can get a bigger picture of the direction of Universal Insurance Holdings's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 7.2%. This means, we can presume Universal Insurance Holdings will grow its earnings by 7.2% every year for the next few years.

Next Steps:

For Universal Insurance Holdings, I've put together three relevant factors you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is UVE worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether UVE is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of UVE? Explore our interactive list of stocks with large growth 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 editorial-team@simplywallst.com. 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.