Intrinsic value of United Insurance Holdings - UIHC

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$15.22

  Intrinsic Value

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  Rating & Target

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  Value-price divergence*

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$15.22

 
Intrinsic value

$273.97

 
Up/down potential

+999%

 
Rating

str. buy

 
Value-price divergence* premium content

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

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of UIHC 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 0.3

 

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, %
  36.03
  31.00
  28.40
  26.06
  23.95
  22.06
  20.35
  18.82
  17.44
  16.19
  15.07
  14.07
  13.16
  12.34
  11.61
  10.95
  10.35
  9.82
  9.34
  8.90
  8.51
  8.16
  7.84
  7.56
  7.30
  7.07
  6.87
  6.68
  6.51
  6.36
  6.22
Revenue, $m
  0
  638
  819
  1,033
  1,280
  1,562
  1,880
  2,234
  2,624
  3,048
  3,508
  4,001
  4,528
  5,087
  5,677
  6,299
  6,951
  7,634
  8,346
  9,089
  9,863
  10,668
  11,505
  12,374
  13,278
  14,218
  15,194
  16,209
  17,264
  18,362
  19,505
Variable operating expenses, $m
 
  563
  722
  910
  1,128
  1,376
  1,656
  1,968
  2,311
  2,684
  3,089
  3,522
  3,985
  4,477
  4,997
  5,544
  6,118
  6,718
  7,346
  8,000
  8,681
  9,389
  10,126
  10,891
  11,687
  12,513
  13,373
  14,266
  15,195
  16,161
  17,167
Fixed operating expenses, $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
Total operating expenses, $m
  480
  563
  722
  910
  1,128
  1,376
  1,656
  1,968
  2,311
  2,684
  3,089
  3,522
  3,985
  4,477
  4,997
  5,544
  6,118
  6,718
  7,346
  8,000
  8,681
  9,389
  10,126
  10,891
  11,687
  12,513
  13,373
  14,266
  15,195
  16,161
  17,167
Operating income, $m
  7
  75
  97
  122
  152
  186
  224
  266
  313
  364
  419
  480
  543
  610
  681
  755
  833
  915
  1,000
  1,090
  1,182
  1,279
  1,379
  1,483
  1,592
  1,704
  1,821
  1,943
  2,070
  2,201
  2,338
EBITDA, $m
  19
  81
  104
  131
  163
  199
  239
  284
  333
  387
  446
  508
  575
  646
  721
  800
  883
  970
  1,061
  1,155
  1,253
  1,356
  1,462
  1,572
  1,687
  1,807
  1,931
  2,060
  2,194
  2,333
  2,479
Interest expense (income), $m
  0
  2
  10
  20
  32
  45
  61
  78
  97
  118
  142
  167
  194
  222
  253
  285
  319
  354
  392
  431
  471
  513
  557
  603
  650
  700
  751
  804
  859
  917
  977
Earnings before tax, $m
  7
  73
  87
  102
  120
  141
  163
  189
  216
  246
  278
  313
  349
  387
  428
  470
  514
  561
  609
  659
  711
  765
  822
  881
  941
  1,005
  1,070
  1,139
  1,210
  1,284
  1,361
Tax expense, $m
  1
  20
  23
  28
  33
  38
  44
  51
  58
  66
  75
  85
  94
  105
  115
  127
  139
  151
  164
  178
  192
  207
  222
  238
  254
  271
  289
  308
  327
  347
  368
Net income, $m
  6
  53
  63
  75
  88
  103
  119
  138
  158
  179
  203
  228
  255
  283
  312
  343
  375
  409
  444
  481
  519
  559
  600
  643
  687
  733
  781
  831
  883
  937
  994

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
  1,000
  1,310
  1,682
  2,120
  2,628
  3,208
  3,861
  4,588
  5,387
  6,260
  7,203
  8,216
  9,298
  10,445
  11,658
  12,934
  14,273
  15,675
  17,138
  18,664
  20,252
  21,905
  23,624
  25,410
  27,266
  29,194
  31,199
  33,283
  35,450
  37,705
  40,052
Adjusted assets (=assets-cash), $m
  1,000
  1,310
  1,682
  2,120
  2,628
  3,208
  3,861
  4,588
  5,387
  6,260
  7,203
  8,216
  9,298
  10,445
  11,658
  12,934
  14,273
  15,675
  17,138
  18,664
  20,252
  21,905
  23,624
  25,410
  27,266
  29,194
  31,199
  33,283
  35,450
  37,705
  40,052
Revenue / Adjusted assets
  0.000
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
  0.487
Average production assets, $m
  18
  23
  29
  37
  46
  56
  68
  80
  94
  110
  126
  144
  163
  183
  204
  227
  250
  275
  300
  327
  355
  384
  414
  445
  478
  512
  547
  584
  622
  661
  702
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
  54
  289
  572
  904
  1,290
  1,730
  2,225
  2,777
  3,384
  4,046
  4,762
  5,531
  6,352
  7,223
  8,143
  9,112
  10,128
  11,192
  12,303
  13,461
  14,667
  15,921
  17,225
  18,581
  19,990
  21,454
  22,975
  24,557
  26,202
  27,913
  29,695
Total liabilities, $m
  758
  994
  1,277
  1,609
  1,995
  2,435
  2,930
  3,482
  4,089
  4,751
  5,467
  6,236
  7,057
  7,928
  8,848
  9,817
  10,833
  11,897
  13,008
  14,166
  15,372
  16,626
  17,930
  19,286
  20,695
  22,159
  23,680
  25,262
  26,907
  28,618
  30,400
Total equity, $m
  241
  316
  405
  511
  633
  773
  930
  1,106
  1,298
  1,509
  1,736
  1,980
  2,241
  2,517
  2,810
  3,117
  3,440
  3,778
  4,130
  4,498
  4,881
  5,279
  5,693
  6,124
  6,571
  7,036
  7,519
  8,021
  8,544
  9,087
  9,653
Total liabilities and equity, $m
  999
  1,310
  1,682
  2,120
  2,628
  3,208
  3,860
  4,588
  5,387
  6,260
  7,203
  8,216
  9,298
  10,445
  11,658
  12,934
  14,273
  15,675
  17,138
  18,664
  20,253
  21,905
  23,623
  25,410
  27,266
  29,195
  31,199
  33,283
  35,451
  37,705
  40,053
Debt-to-equity ratio
  0.224
  0.920
  1.410
  1.770
  2.040
  2.240
  2.390
  2.510
  2.610
  2.680
  2.740
  2.790
  2.830
  2.870
  2.900
  2.920
  2.940
  2.960
  2.980
  2.990
  3.000
  3.020
  3.030
  3.030
  3.040
  3.050
  3.060
  3.060
  3.070
  3.070
  3.080
Adjusted equity ratio
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241
  0.241

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  6
  53
  63
  75
  88
  103
  119
  138
  158
  179
  203
  228
  255
  283
  312
  343
  375
  409
  444
  481
  519
  559
  600
  643
  687
  733
  781
  831
  883
  937
  994
Depreciation, amort., depletion, $m
  12
  6
  7
  9
  11
  13
  15
  17
  20
  23
  27
  29
  33
  37
  41
  45
  50
  55
  60
  65
  71
  77
  83
  89
  96
  102
  109
  117
  124
  132
  140
Funds from operations, $m
  107
  59
  71
  84
  98
  115
  134
  155
  178
  203
  229
  257
  288
  319
  353
  389
  426
  464
  504
  546
  590
  636
  683
  732
  783
  836
  891
  948
  1,008
  1,070
  1,134
Change in working capital, $m
  41
  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
  66
  60
  71
  84
  98
  115
  134
  155
  178
  203
  229
  257
  288
  319
  353
  389
  426
  464
  504
  546
  590
  636
  683
  732
  783
  836
  891
  948
  1,008
  1,070
  1,134
Maintenance CAPEX, $m
  0
  -4
  -5
  -6
  -7
  -9
  -11
  -14
  -16
  -19
  -22
  -25
  -29
  -33
  -37
  -41
  -45
  -50
  -55
  -60
  -65
  -71
  -77
  -83
  -89
  -96
  -102
  -109
  -117
  -124
  -132
New CAPEX, $m
  -3
  -5
  -7
  -8
  -9
  -10
  -11
  -13
  -14
  -15
  -17
  -18
  -19
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -35
  -37
  -38
  -40
  -41
Cash from investing activities, $m
  -50
  -9
  -12
  -14
  -16
  -19
  -22
  -27
  -30
  -34
  -39
  -43
  -48
  -53
  -58
  -63
  -68
  -75
  -81
  -87
  -93
  -100
  -107
  -114
  -122
  -130
  -137
  -146
  -155
  -164
  -173
Free cash flow, $m
  16
  51
  59
  70
  82
  96
  112
  129
  148
  168
  191
  214
  240
  267
  295
  325
  357
  390
  424
  460
  497
  536
  576
  618
  661
  706
  753
  802
  853
  906
  961
Issuance/(repayment) of debt, $m
  56
  235
  282
  333
  386
  440
  496
  551
  607
  662
  716
  769
  821
  871
  920
  969
  1,016
  1,064
  1,111
  1,158
  1,206
  1,254
  1,304
  1,356
  1,409
  1,464
  1,522
  1,582
  1,645
  1,711
  1,781
Issuance/(repurchase) of shares, $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 financing (excl. dividends), $m  
  55
  235
  282
  333
  386
  440
  496
  551
  607
  662
  716
  769
  821
  871
  920
  969
  1,016
  1,064
  1,111
  1,158
  1,206
  1,254
  1,304
  1,356
  1,409
  1,464
  1,522
  1,582
  1,645
  1,711
  1,781
Total cash flow (excl. dividends), $m
  71
  286
  342
  403
  468
  536
  607
  680
  755
  831
  907
  983
  1,060
  1,138
  1,216
  1,294
  1,373
  1,453
  1,535
  1,618
  1,703
  1,790
  1,880
  1,973
  2,070
  2,170
  2,275
  2,384
  2,498
  2,617
  2,742
Retained Cash Flow (-), $m
  -2
  -75
  -90
  -106
  -122
  -140
  -157
  -175
  -193
  -210
  -227
  -244
  -261
  -277
  -292
  -308
  -323
  -338
  -353
  -368
  -383
  -398
  -414
  -430
  -447
  -465
  -483
  -502
  -522
  -543
  -566
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
 
  212
  252
  297
  345
  396
  450
  505
  562
  620
  679
  739
  800
  861
  923
  986
  1,050
  1,115
  1,182
  1,250
  1,320
  1,392
  1,466
  1,543
  1,623
  1,705
  1,792
  1,882
  1,976
  2,074
  2,177
Discount rate, %
 
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
 
  202
  229
  256
  281
  302
  319
  332
  340
  343
  341
  334
  322
  307
  288
  267
  244
  219
  195
  170
  146
  124
  103
  85
  68
  54
  42
  31
  23
  17
  12
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

United Insurance Holdings Corp. operates as a property and casualty insurance holding company that sources, writes, and services residential and commercial property and casualty insurance policies in the United States. It offers single-family homeowners, dwelling fire, renters, condominium unit owners, and commercial residential insurance policies, as well as federal flood, equipment breakdown, and identity theft insurance policies. The company markets and distributes its products through a network of independent agencies in Connecticut, Florida, Georgia, Hawaii, Louisiana, Massachusetts, New Jersey, North Carolina, Rhode Island, South Carolina, and Texas. United Insurance Holdings Corp. is based in St. Petersburg, Florida.

FINANCIAL RATIOS  of  United Insurance Holdings (UIHC)

Valuation Ratios
P/E Ratio 54.9
Price to Sales 0.7
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 5
Price to Free Cash Flow 5.2
Growth Rates
Sales Growth Rate 36%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -72.7%
Cap. Spend. - 3 Yr. Gr. Rate 8.4%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 22.4%
Total Debt to Equity 22.4%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.7%
Ret/ On Assets - 3 Yr. Avg. 4.3%
Return On Total Capital 2.2%
Ret/ On T. Cap. - 3 Yr. Avg. 12.6%
Return On Equity 2.5%
Return On Equity - 3 Yr. Avg. 13.7%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 0%
Gross Margin - 3 Yr. Avg. 0%
EBITDA Margin 3.9%
EBITDA Margin - 3 Yr. Avg. 13.2%
Operating Margin 1.4%
Oper. Margin - 3 Yr. Avg. 12%
Pre-Tax Margin 1.4%
Pre-Tax Margin - 3 Yr. Avg. 12%
Net Profit Margin 1.2%
Net Profit Margin - 3 Yr. Avg. 7.8%
Effective Tax Rate 14.3%
Eff/ Tax Rate - 3 Yr. Avg. 28.6%
Payout Ratio 83.3%

UIHC stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the UIHC stock intrinsic value calculation we used $487 million for the last fiscal year's total revenue generated by United Insurance Holdings. The default revenue input number comes from 2016 income statement of United 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 UIHC stock valuation model: a) initial revenue growth rate of 31% 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 4.6%, whose default value for UIHC is calculated based on our internal credit rating of United 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 United 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 UIHC stock the variable cost ratio is equal to 88.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for UIHC 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 United Insurance Holdings.

Corporate tax rate of 27% is the nominal tax rate for United 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 UIHC 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 UIHC are equal to 3.6%.

Life of production assets of 2.2 years is the average useful life of capital assets used in United 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 UIHC 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 - $241 million for United 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 21.975 million for United 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 United Insurance Holdings at the current share price and the inputted number of shares is $0.3 billion.


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