Should You Buy Universal Insurance Holdings Inc (NYSE:UVE) At US$035.15?
Universal Insurance Holdings Inc (NYSE:UVE), a insurance company based in United States, saw a decent share price growth in the teens level on the NYSE over the last few months. As a small cap stock, hardly covered by any analysts, there is generally more of an opportunity for mispricing as there is less activity to push the stock closer to fair value. Is there still an opportunity here to buy? Let’s examine Universal Insurance Holdings’s valuation and outlook in more detail to determine if there’s still a bargain opportunity. View out our latest analysis for Universal Insurance Holdings
Is Universal Insurance Holdings still cheap?
According to my relative valuation model, the stock seems to be currently fairly priced. In this instance, I’ve used the price-to-equity (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Universal Insurance Holdings’s ratio of 10.55x is trading slightly below its industry peers’ ratio of 14.26x, which means if you buy Universal Insurance Holdings today, you’d be paying a reasonable price for it. And if you believe that Universal Insurance Holdings should be trading at this level in the long run, then there’s not much of an upside to gain from mispricing. Is there another opportunity to buy low in the future? Since Universal Insurance Holdings’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What kind of growth will Universal Insurance Holdings generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. Universal Insurance Holdings’s earnings over the next few years are expected to increase by 32.37%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? UVE’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at UVE? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping an eye on UVE, now may not be the most optimal time to buy, given it is trading around its fair value. However, the positive outlook is encouraging for UVE, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Universal Insurance Holdings. You can find everything you need to know about Universal Insurance Holdings in the latest infographic research report. If you are no longer interested in Universal Insurance Holdings, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
