Heritage Insurance Holdings, Inc. (NYSE: HRTG)

Sector: Financial Services Industry: Insurance - Property & Casualty CIK: 0001598665
Market Cap 760.89 Mn
P/B 1.74
P/E 5.10
P/S 0.90
ROIC (Qtr) 29.73
Div Yield % 0.00
Rev 1y % (Qtr) 0.29
Total Debt (Qtr) 101.66 Mn
Debt/Equity (Qtr) 0.23
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About

Investment thesis

Bull case

  • Strong operating cash flow of 112.35M provides robust 1.11x coverage of total debt 101.66M, indicating excellent debt servicing capability and financial flexibility.
  • Strong tangible asset base of 2.34B provides 22.98x coverage of total debt 101.66M, indicating robust asset backing and low credit risk.
  • Operating cash flow of 112.35M provides exceptional 12.88x coverage of interest expenses 8.72M, showing strong debt service capability.
  • Operating cash flow of 112.35M provides strong 21.78x coverage of stock compensation 5.16M, indicating sustainable incentive practices.
  • Robust free cash flow of 107.49M exceeds capital expenditure of 4.87M by 22.09x, indicating strong organic growth funding capability.

Bear case

  • Operating cash flow of 112.35M barely covers its investment activities of (18.86M), with a coverage ratio of -5.96, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 112.35M provides insufficient coverage of deferred revenue obligations of 733.43M, which is 0.15x, raising concerns about future service delivery capabilities.
  • Free cash flow of 107.49M represents just -2.87x of debt issuance (37.41M), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Retained earnings of 216.57M provide limited buffer against comprehensive income items of (12.94M), which is -16.74x, indicating elevated exposure to market risks.
  • Operating cash flow of 112.35M is outpaced by equity issuance of (2.29M) (-49.15 ratio), indicating concerning reliance on equity markets for funding operations.

Peer comparison

Companies in the Insurance - Property & Casualty
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 PGR Progressive Corp/Oh/ 121.46 Bn 30.80 3.11 6.90 Bn
2 CB Chubb Ltd 109.27 Bn 36.88 5.64 21.01 Bn
3 ALL Allstate Corp 69.21 Bn 29.01 1.62 8.09 Bn
4 TRV Travelers Companies, Inc. 67.61 Bn 10.75 1.38 9.27 Bn
5 HIG Hartford Insurance Group, Inc. 61.19 Bn 37.09 3.27 4.37 Bn
6 WRB Berkley W R Corp 38.52 Bn 124.63 8.69 2.87 Bn
7 CINF Cincinnati Financial Corp 26.91 Bn 74.14 6.73 0.88 Bn
8 MKL Markel Group Inc. 26.46 Bn 13.00 1.68 4.28 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.16 0.50
EV to Cash from Ops. EV/CFO 3.47 -16.03
EV to Debt EV to Debt 3.83 11.42
EV to EBIT EV/EBIT 1.86 22.13
EV to EBITDA EV/EBITDA 1.76 17.53
EV to Free Cash Flow [EV/FCF] EV/FCF 3.62 68.07
EV to Market Cap EV to Market Cap 0.51 0.91
EV to Revenue EV/Rev 0.46 2.31
Price to Book Value [P/B] P/B 1.74 2.97
Price to Earnings [P/E] P/E 5.10 29.62
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.00 7.41
Dividend Payout Ratio % Div Payout % (Qtr) 0.00 19.66
Dividend per Basic Share Div per Share (Qtr) 0.00 1.49
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 0.00 37.69
Interest Coverage Int. cover (Qtr) 23.95 -9.19
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 31.58 -17.83
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 10.14 30.27
Dividend Growth (1y) % Div 1y % (Qtr) 0.00 16.34
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 90.75 62.82
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 106.09 35.62
EBIT Growth (1y) % EBIT 1y % (Qtr) 112.69 56.25
EBT Growth (1y) % EBT 1y % (Qtr) 130.46 52.70
EPS Growth (1y) % EPS 1y % (Qtr) 90.16 48.20
FCF Growth (1y) % FCF 1y % (Qtr) -54.42 15.47
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 32.42 16.55
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.36 0.38
Cash Payout Ratio Cash Payout (Qtr) 0.00 0.45
Cash Ratio Cash Ratio 0.00 0.02
Current Ratio Current Ratio 0.00 0.06
Debt to Equity Ratio Debt/Equity (Qtr) 0.23 0.23
Interest Cover Ratio Int Coverage (Qtr) 23.95 -9.19
Times Interest Earned Times Interest Earned (Qtr) 23.95 -9.19
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 26.20 14.01
EBIT Margin % EBIT Margin % (Qtr) 24.81 13.05
EBT Margin % EBT Margin % (Qtr) 23.78 12.25
Gross Margin % Gross Margin % (Qtr) 57.40 40.49
Net Profit Margin % Net Margin % (Qtr) 17.70 9.63