Intrinsic value of 1347 Property Insurance Holdings - PIH

Previous Close

$7.45

  Intrinsic Value

$12.45

stock screener

  Rating & Target

str. buy

+67%

Previous close

$7.45

 
Intrinsic value

$12.45

 
Up/down potential

+67%

 
Rating

str. buy

Our model is not good at valuating stocks of financial companies, such as PIH.

We calculate the intrinsic value of PIH stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 0.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  18.52
  12.50
  11.75
  11.08
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.35
  7.12
  6.91
  6.72
  6.54
  6.39
  6.25
  6.13
  6.01
  5.91
  5.82
  5.74
  5.66
  5.60
  5.54
  5.48
  5.44
  5.39
  5.35
Revenue, $m
  0
  36
  40
  45
  49
  54
  59
  65
  70
  76
  82
  88
  95
  102
  109
  116
  123
  131
  140
  148
  157
  166
  176
  186
  197
  208
  219
  231
  244
  257
  271
Variable operating expenses, $m
 
  21
  24
  27
  29
  32
  35
  38
  42
  45
  49
  52
  56
  60
  64
  69
  73
  78
  83
  88
  93
  99
  105
  111
  117
  123
  130
  137
  145
  153
  161
Fixed operating expenses, $m
 
  13
  14
  14
  14
  15
  15
  15
  16
  16
  17
  17
  17
  18
  18
  19
  19
  20
  20
  21
  21
  22
  22
  23
  24
  24
  25
  25
  26
  27
  27
Total operating expenses, $m
  32
  34
  38
  41
  43
  47
  50
  53
  58
  61
  66
  69
  73
  78
  82
  88
  92
  98
  103
  109
  114
  121
  127
  134
  141
  147
  155
  162
  171
  180
  188
Operating income, $m
  0
  1
  3
  4
  6
  7
  9
  11
  13
  15
  17
  19
  21
  23
  26
  28
  31
  34
  36
  39
  42
  46
  49
  53
  56
  60
  64
  69
  73
  78
  83
EBITDA, $m
  0
  1
  3
  4
  6
  7
  9
  11
  13
  15
  17
  19
  21
  23
  26
  28
  31
  34
  36
  39
  42
  46
  49
  53
  56
  60
  64
  69
  73
  78
  83
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  1
  1
  2
  2
  2
  2
  3
  3
  3
  4
  4
  4
  5
  5
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
Earnings before tax, $m
  0
  1
  2
  4
  5
  7
  8
  10
  11
  13
  15
  16
  18
  20
  23
  25
  27
  29
  32
  34
  37
  40
  43
  46
  49
  53
  56
  60
  64
  68
  72
Tax expense, $m
  0
  0
  1
  1
  1
  2
  2
  3
  3
  3
  4
  4
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  12
  12
  13
  14
  15
  16
  17
  18
  20
Net income, $m
  0
  1
  2
  3
  4
  5
  6
  7
  8
  9
  11
  12
  13
  15
  16
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  38
  41
  44
  47
  50
  53

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  91
  102
  114
  127
  140
  154
  169
  184
  200
  216
  233
  251
  269
  289
  308
  329
  351
  373
  396
  421
  446
  472
  500
  529
  558
  590
  622
  657
  692
  730
  769
Adjusted assets (=assets-cash), $m
  91
  102
  114
  127
  140
  154
  169
  184
  200
  216
  233
  251
  269
  289
  308
  329
  351
  373
  396
  421
  446
  472
  500
  529
  558
  590
  622
  657
  692
  730
  769
Revenue / Adjusted assets
  0.000
  0.353
  0.351
  0.354
  0.350
  0.351
  0.349
  0.353
  0.350
  0.352
  0.352
  0.351
  0.353
  0.353
  0.354
  0.353
  0.350
  0.351
  0.354
  0.352
  0.352
  0.352
  0.352
  0.352
  0.353
  0.353
  0.352
  0.352
  0.353
  0.352
  0.352
Average production assets, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Working capital, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total debt, $m
  0
  5
  11
  17
  23
  29
  36
  43
  50
  58
  66
  74
  82
  91
  100
  110
  120
  130
  141
  152
  164
  176
  189
  202
  216
  230
  246
  261
  278
  295
  313
Total liabilities, $m
  42
  47
  53
  59
  65
  71
  78
  85
  92
  100
  108
  116
  124
  133
  142
  152
  162
  172
  183
  194
  206
  218
  231
  244
  258
  272
  288
  303
  320
  337
  355
Total equity, $m
  49
  55
  61
  68
  75
  83
  91
  99
  107
  116
  125
  135
  145
  155
  166
  177
  189
  201
  213
  226
  240
  254
  269
  284
  300
  317
  335
  353
  372
  393
  414
Total liabilities and equity, $m
  91
  102
  114
  127
  140
  154
  169
  184
  199
  216
  233
  251
  269
  288
  308
  329
  351
  373
  396
  420
  446
  472
  500
  528
  558
  589
  623
  656
  692
  730
  769
Debt-to-equity ratio
  0.000
  0.100
  0.180
  0.240
  0.300
  0.350
  0.400
  0.430
  0.470
  0.500
  0.520
  0.550
  0.570
  0.590
  0.610
  0.620
  0.640
  0.650
  0.660
  0.670
  0.680
  0.690
  0.700
  0.710
  0.720
  0.730
  0.730
  0.740
  0.750
  0.750
  0.760
Adjusted equity ratio
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538
  0.538

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  0
  1
  2
  3
  4
  5
  6
  7
  8
  9
  11
  12
  13
  15
  16
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  38
  41
  44
  47
  50
  53
Depreciation, amort., depletion, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Funds from operations, $m
  6
  1
  2
  3
  4
  5
  6
  7
  8
  9
  11
  12
  13
  15
  16
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  38
  41
  44
  47
  50
  53
Change in working capital, $m
  3
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from operations, $m
  3
  1
  2
  3
  4
  5
  6
  7
  8
  9
  11
  12
  13
  15
  16
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  38
  41
  44
  47
  50
  53
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
New CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from investing activities, $m
  -7
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Free cash flow, $m
  -4
  1
  2
  3
  4
  5
  6
  7
  8
  9
  11
  12
  13
  15
  16
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  38
  41
  44
  47
  50
  53
Issuance/(repayment) of debt, $m
  0
  5
  6
  6
  6
  6
  7
  7
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
Issuance/(repurchase) of shares, $m
  -1
  5
  5
  4
  3
  3
  2
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -1
  10
  11
  10
  9
  9
  9
  8
  7
  8
  8
  8
  9
  9
  9
  10
  10
  10
  11
  11
  12
  12
  13
  13
  14
  14
  15
  16
  16
  17
  18
Total cash flow (excl. dividends), $m
  -5
  11
  12
  13
  13
  14
  15
  15
  16
  17
  19
  20
  22
  24
  26
  28
  30
  32
  34
  36
  39
  41
  44
  47
  50
  53
  56
  60
  63
  67
  71
Retained Cash Flow (-), $m
  1
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
  -9
  -10
  -10
  -10
  -11
  -11
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -17
  -18
  -18
  -19
  -20
  -21
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  5
  6
  6
  6
  6
  7
  7
  7
  8
  9
  11
  12
  13
  15
  16
  18
  20
  21
  23
  25
  27
  29
  31
  34
  36
  39
  41
  44
  47
  50
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  5
  4
  4
  4
  3
  3
  2
  2
  2
  1
  1
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100
  90.0
  82.5
  77.0
  73.0
  70.3
  68.6
  67.6
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4
  67.4

1347 Property Insurance Holdings, Inc. is a holding company. The Company, through its subsidiaries, is engaged providing property and casualty insurance. The Company offers homeowners' insurance, manufactured home insurance and dwelling fire insurance. It writes both full peril property policies, as well as wind/hail only exposures and it distributes policies through independent insurance agents. Maison Managers, Inc. (MMI) serves as the Company's management services subsidiary. Its other subsidiaries include Maison Insurance Company (Maison), a property and casualty insurance company, and ClaimCor, LLC (ClaimCor), a claims adjusting company. Its homeowners' insurance policy is written on an owner occupied dwelling, which protects from all perils, except for those specifically excluded from coverage by the policy. Its wind/hail insurance policy is written on an owner or non-owner occupied dwelling, which protects from the perils of wind and/or hail-only weather events.

FINANCIAL RATIOS  of  1347 Property Insurance Holdings (PIH)

Valuation Ratios
P/E Ratio 0
Price to Sales 1.4
Price to Book 0.9
Price to Tangible Book
Price to Cash Flow 15.2
Price to Free Cash Flow 15.2
Growth Rates
Sales Growth Rate 18.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets 0%
Ret/ On Assets - 3 Yr. Avg. 1.9%
Return On Total Capital 0%
Ret/ On T. Cap. - 3 Yr. Avg. 3%
Return On Equity 0%
Return On Equity - 3 Yr. Avg. 3.3%
Asset Turnover 0.4
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 0%
EBITDA Margin - 3 Yr. Avg. 8.1%
Operating Margin 0%
Oper. Margin - 3 Yr. Avg. 8.1%
Pre-Tax Margin 0%
Pre-Tax Margin - 3 Yr. Avg. 8.1%
Net Profit Margin 0%
Net Profit Margin - 3 Yr. Avg. 4.5%
Effective Tax Rate 0%
Eff/ Tax Rate - 3 Yr. Avg. 11.1%
Payout Ratio 0%

PIH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PIH stock intrinsic value calculation we used $32 million for the last fiscal year's total revenue generated by 1347 Property Insurance Holdings. The default revenue input number comes from 2016 income statement of 1347 Property Insurance Holdings. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our PIH stock valuation model: a) initial revenue growth rate of 12.5% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for PIH is calculated based on our internal credit rating of 1347 Property Insurance Holdings, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of 1347 Property Insurance Holdings.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of PIH stock the variable cost ratio is equal to 59.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $13 million in the base year in the intrinsic value calculation for PIH stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for 1347 Property Insurance Holdings.

Corporate tax rate of 27% is the nominal tax rate for 1347 Property Insurance Holdings. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the PIH stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for PIH are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in 1347 Property Insurance Holdings operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for PIH is equal to 0%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $49 million for 1347 Property Insurance Holdings - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 6.109 million for 1347 Property Insurance Holdings is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of 1347 Property Insurance Holdings at the current share price and the inputted number of shares is $0.0 billion.

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Financial statements of PIH
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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