HCI Group, Inc. – Value Analysis (NYSE:HCI) : October 17, 2017

Capitalcube gives HCI Group, Inc. a score of 54.

Our analysis is based on comparing HCI Group, Inc. with the following peers – United Insurance Holdings Corp., Federated National Holding Company, Heritage Insurance Holdings, Inc., State Auto Financial Corporation, Erie Indemnity Company Class A, Universal Insurance Holdings, Inc., Donegal Group Inc. Class A, Hilltop Holdings Inc., Kingstone Companies, Inc. and Horace Mann Educators Corporation (UIHC-US, FNHC-US, HRTG-US, STFC-US, ERIE-US, UVE-US, DGICA-US, HTH-US, KINS-US and HMN-US).

Fundamental Overview

HCI Group, Inc. has a fundamental score of 54 and has a relative valuation of UNDERVALUED.

Fundamental Score

Company Overview

  • It currently trades at a Price/Book ratio of (1.62).
  • We classify HCI-US as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • HCI-US has relatively high profit margins while operating with median capital turns.
  • Compared with its chosen peers, the company’s annual revenues and earnings change at a slower rate, implying a lack of strategic focus and/or lack of execution success.
  • HCI-US‘s return on equity currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • HCI-US‘s revenues have grown more slowly than the peer median over the last few years, which combined with the stock price’s relatively low P/E ratio suggests substandard growth expectations relative to peers.
  • The company’s level of equity capital investment suggests it might be under-investing in a business with above median returns.
  • HCI-US might have enough interest coverage to take-on additional debt prudently.

Drivers of Margin

  • Relatively high pre-tax margin suggests control on operating costs versus peers.
  • The company’s underwriting margin (i.e. premiums earned minus insurance losses, expressed as a percentage of premiums earned) of 34.45% is around peer median suggesting that HCI-US does not benefit from either a differentiated strategy with pricing advantages and/or a disciplined strategy in writing policies versus peers. However, HCI-US‘s pre-tax margin is more than the peer median (21.87% compared to 8.61%) suggesting relatively tight control on operating costs.
Drivers of Margins

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Differentiated; High Cost, Commodity; High Cost, Commodity; Low Cost

Company Profile

HCI Group, Inc. holding company, which engages in the provision of property and casualty insurance, reinsurance, real estate, and information technology. The company was founded by Paresh Patel, Gregory Politis, and Martin A. Traber in 2006 and is headquartered in Tampa, FL.