This insurance company beat analysts’ earnings estimates by $0.25 last quarter.
Universal Insurance Holdings, Inc. (UVE)
From Validea Hot List Newsletter
Strategy: P/E/Growth Investor
Based on: Peter Lynch
Universal Insurance Holdings, Inc. (UVE) is a private personal residential homeowners insurance company in Florida. The company’s subsidiaries include Universal Property & Casualty Insurance Company (UPCIC) and American Platinum Property and Casualty Insurance Company (APPCIC). UPCIC writes homeowners insurance policies in states, including Alabama, Delaware, Florida, Georgia, Hawaii, Indiana, Maryland, Massachusetts, Michigan, Minnesota, North Carolina, Pennsylvania, South Carolina and Virginia. APPCIC writes homeowners and commercial residential insurance policies in Florida.
DETERMINE THE CLASSIFICATION: This methodology would consider UVE a “fast-grower”.
P/E/GROWTH RATIO: PASS: The investor should examine the P/E (11.71) relative to the growth rate (22.50%), based on the average of the 3, 4 and 5 year historical eps growth rates, for a company. This is a quick way of determining the fairness of the price. In this particular case, the P/E/G ratio for UVE (0.52) makes it favorable.
EPS GROWTH RATE: PASS: This methodology favors companies that have several years of fast earnings growth, as these companies have a proven formula for growth that in many cases can continue many more years. This methodology likes to see earnings growth in the range of 20% to 50%, as earnings growth over 50% may be unsustainable. The EPS growth rate for UVE is 22.5%, based on the average of the 3, 4 and 5 year historical eps growth rates, which is considered very good.
EQUITY/ASSETS RATIO: PASS: This methodology uses the Equity/Assets Ratio as a way to determine a financial intermediary’s health, as it is a better measure than the Debt/Equity Ratio. UVE’s Equity/Assets ratio (29.00%) is extremely healthy and above the minimum 5% this methodology looks for, thus passing the criterion.
RETURN ON ASSETS: PASS: This methodology uses Return on Assets as a way to measure a financial intermediary’s profitability. UVE’s ROA (8.98%) is above the minimum 1% that this methodology looks for, thus passing the criterion.
John Reese, Validea Hot List Newsletter, www.validea.com, 877-439-0506, September 7, 2018