Growing and Undervalued : HCI Group Inc

From my watch list, let’s have a short view of HCI Group Inc (HCI, Financial), that looks undervalued based on the Peter Lynch Price Value.

HCI Group Inc (HCI)

Description:The company has a market cap of 503 $M. Through its subsidiaries, it provides property and casualty insurance. Its principal operating subsidiary, Homeowners Choice Property & Casualty Insurance Company, Inc., was incorporated and began operations in 2007 and provides property and casualty homeowners' insurance, condominium-owners' insurance, tenants' insurance, and dwelling fire insurance to individuals owning or occupying property in Florida under its Homeowners Choice brand. Its operations are supported by the company's wholly owned subsidiaries such as Homeowners Choice Managers, Inc. which acts as managing general agent and provides marketing, underwriting, claims settlement, accounting and financial services to HCPCI; and Southern Administration, Inc. which provides policy administration services to HCPCI.

Ratios: HCIÂ has a ROA of 10.90% and a ROE of 36.12%. All these ratios are better then 90% of other companies from the Global Insurance – Property & Casualty Industry.

Compared to the history of HCI, 2008 was the best year for ROE when reached a maximum level of 48.93%. The year 2013 was the best for ROA; it reached the maximum level of 15.17%. ROC (of Joel Greenblatt (Trades, Portfolio)) cannot be applied to this company as it cannot be applied to banks and insurance companies.

Financials: The company has a financial strength of 8 out of 10. Cash covers debts enough, with a Cash to Debt ratio of 2.43, at worst levels of HCI history. The company was out of debt in 2012. At these levels, it is outperforming the sector that has an average level of 1.61. Interest coverage is 9.66 versus an Industry median of 22.74.

Growth: Over the last five years, the company had a steady and strong growth rate (per share).

During the last 12 months, EPS dropped by 15%. Revenue and EBITDA didn’t face big changes. A special note has to be given to the Free Cash Flow, growing by 59.90% and the Book Value that is grew by 13.20%

Price: The stock is trading at $46 and over the last year, the price rose +23%. It has a double-top at $53.15 and started an upward trend on October 2, 2014 that maybe will end at that level.

Currently, the price is down 9% from its 52-week high and up 39% from its 52-week low. The 200-days Moving Average price is$43.15

The stock looks undervalued at current prices. The Peter Lynch Earnings Line gives a fair value of $79 with a margin of safety of 41%, the DCF model gives a fair value of $73 with a margin of safety of 36%.

Dividend Yield: HCI has a dividend yield of 2.30% with a growth rate of 37.30% over the last 3 years

Gurus & Insiders: According to Guru Focus, HCI is held just by Guru Jim Simons that holds 0.17% of shares Outstanding, Chuck Royce holding 0.28% of Outstanding Shares, and Paul Tudor Jones with 0.05% of Shares Outstanding.

There are no recent activities by Insiders. HCI has 70% of Institutional Ownership and 8% of Insiders Ownership.

Compounding : Over the last 5 years of data (starting from December 2010) the company had the following compounding returns :