Intrinsic value of United Insurance Holdings - UIHC

Previous Close

$16.03

  Intrinsic Value

$86.37

stock screener

  Rating & Target

str. buy

+439%

  Value-price divergence*

+8%

Previous close

$16.03

 
Intrinsic value

$86.37

 
Up/down potential

+439%

 
Rating

str. buy

 
Value-price divergence*

+8%

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
  13.90
  13.01
  12.21
  11.49
  10.84
  10.26
  9.73
  9.26
  8.83
  8.45
  8.10
  7.79
  7.51
  7.26
  7.04
  6.83
  6.65
  6.48
  6.34
  6.20
  6.08
  5.97
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
  5.47
  5.42
Revenue, $m
  0
  555
  627
  703
  784
  869
  958
  1,052
  1,149
  1,250
  1,356
  1,466
  1,580
  1,699
  1,822
  1,950
  2,084
  2,222
  2,366
  2,516
  2,672
  2,835
  3,004
  3,181
  3,365
  3,557
  3,758
  3,967
  4,186
  4,415
  4,654
Variable operating expenses, $m
 
  490
  553
  620
  692
  766
  845
  927
  1,013
  1,102
  1,195
  1,290
  1,391
  1,495
  1,604
  1,717
  1,834
  1,956
  2,083
  2,215
  2,352
  2,495
  2,644
  2,800
  2,962
  3,131
  3,307
  3,492
  3,684
  3,886
  4,096
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
  490
  553
  620
  692
  766
  845
  927
  1,013
  1,102
  1,195
  1,290
  1,391
  1,495
  1,604
  1,717
  1,834
  1,956
  2,083
  2,215
  2,352
  2,495
  2,644
  2,800
  2,962
  3,131
  3,307
  3,492
  3,684
  3,886
  4,096
Operating income, $m
  7
  65
  74
  83
  93
  103
  113
  125
  136
  148
  161
  176
  189
  204
  218
  234
  250
  266
  284
  302
  320
  340
  360
  381
  403
  426
  450
  476
  502
  529
  558
EBITDA, $m
  19
  68
  77
  87
  97
  107
  118
  130
  142
  154
  167
  181
  195
  210
  225
  241
  257
  274
  292
  311
  330
  350
  371
  393
  415
  439
  464
  490
  517
  545
  575
Interest expense (income), $m
  0
  2
  6
  10
  14
  18
  23
  28
  33
  38
  44
  49
  55
  62
  68
  75
  82
  89
  97
  104
  113
  121
  130
  139
  149
  159
  169
  180
  192
  204
  216
Earnings before tax, $m
  7
  63
  68
  73
  79
  85
  91
  97
  104
  110
  118
  126
  134
  142
  150
  159
  168
  177
  187
  197
  208
  219
  230
  242
  255
  268
  281
  295
  310
  326
  342
Tax expense, $m
  1
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  34
  36
  38
  41
  43
  45
  48
  51
  53
  56
  59
  62
  65
  69
  72
  76
  80
  84
  88
  92
Net income, $m
  6
  46
  50
  54
  58
  62
  66
  71
  76
  81
  86
  92
  98
  104
  110
  116
  123
  130
  137
  144
  152
  160
  168
  177
  186
  195
  205
  216
  226
  238
  249

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
  1,139
  1,287
  1,444
  1,610
  1,785
  1,968
  2,159
  2,359
  2,568
  2,784
  3,010
  3,245
  3,488
  3,742
  4,005
  4,279
  4,563
  4,859
  5,167
  5,487
  5,821
  6,169
  6,531
  6,910
  7,304
  7,716
  8,146
  8,596
  9,065
  9,557
Adjusted assets (=assets-cash), $m
  1,000
  1,139
  1,287
  1,444
  1,610
  1,785
  1,968
  2,159
  2,359
  2,568
  2,784
  3,010
  3,245
  3,488
  3,742
  4,005
  4,279
  4,563
  4,859
  5,167
  5,487
  5,821
  6,169
  6,531
  6,910
  7,304
  7,716
  8,146
  8,596
  9,065
  9,557
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
  20
  23
  25
  28
  31
  35
  38
  41
  45
  49
  53
  57
  61
  66
  70
  75
  80
  85
  91
  96
  102
  108
  115
  121
  128
  135
  143
  151
  159
  168
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
  160
  272
  391
  517
  650
  789
  934
  1,086
  1,244
  1,408
  1,580
  1,758
  1,943
  2,135
  2,335
  2,543
  2,758
  2,983
  3,217
  3,460
  3,713
  3,977
  4,252
  4,539
  4,839
  5,151
  5,478
  5,819
  6,176
  6,548
Total liabilities, $m
  758
  865
  977
  1,096
  1,222
  1,355
  1,494
  1,639
  1,791
  1,949
  2,113
  2,285
  2,463
  2,648
  2,840
  3,040
  3,248
  3,463
  3,688
  3,922
  4,165
  4,418
  4,682
  4,957
  5,244
  5,544
  5,856
  6,183
  6,524
  6,881
  7,253
Total equity, $m
  241
  274
  310
  348
  388
  430
  474
  520
  569
  619
  671
  725
  782
  841
  902
  965
  1,031
  1,100
  1,171
  1,245
  1,322
  1,403
  1,487
  1,574
  1,665
  1,760
  1,860
  1,963
  2,072
  2,185
  2,303
Total liabilities and equity, $m
  999
  1,139
  1,287
  1,444
  1,610
  1,785
  1,968
  2,159
  2,360
  2,568
  2,784
  3,010
  3,245
  3,489
  3,742
  4,005
  4,279
  4,563
  4,859
  5,167
  5,487
  5,821
  6,169
  6,531
  6,909
  7,304
  7,716
  8,146
  8,596
  9,066
  9,556
Debt-to-equity ratio
  0.224
  0.580
  0.880
  1.120
  1.330
  1.510
  1.660
  1.790
  1.910
  2.010
  2.100
  2.180
  2.250
  2.310
  2.370
  2.420
  2.470
  2.510
  2.550
  2.580
  2.620
  2.650
  2.680
  2.700
  2.730
  2.750
  2.770
  2.790
  2.810
  2.830
  2.840
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
  46
  50
  54
  58
  62
  66
  71
  76
  81
  86
  92
  98
  104
  110
  116
  123
  130
  137
  144
  152
  160
  168
  177
  186
  195
  205
  216
  226
  238
  249
Depreciation, amort., depletion, $m
  12
  3
  4
  4
  4
  5
  5
  5
  6
  6
  6
  5
  6
  6
  7
  7
  8
  8
  9
  9
  10
  10
  11
  11
  12
  13
  14
  14
  15
  16
  17
Funds from operations, $m
  107
  50
  53
  58
  62
  66
  71
  76
  81
  87
  92
  98
  104
  110
  116
  123
  130
  138
  145
  153
  161
  170
  179
  188
  198
  208
  219
  230
  241
  254
  266
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
  50
  53
  58
  62
  66
  71
  76
  81
  87
  92
  98
  104
  110
  116
  123
  130
  138
  145
  153
  161
  170
  179
  188
  198
  208
  219
  230
  241
  254
  266
Maintenance CAPEX, $m
  0
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -7
  -7
  -8
  -8
  -9
  -9
  -10
  -10
  -11
  -11
  -12
  -13
  -14
  -14
  -15
  -16
New CAPEX, $m
  -3
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
  -7
  -8
  -8
  -8
  -9
Cash from investing activities, $m
  -50
  -4
  -5
  -5
  -6
  -6
  -6
  -6
  -8
  -8
  -9
  -9
  -9
  -10
  -10
  -12
  -12
  -13
  -13
  -14
  -15
  -16
  -16
  -17
  -18
  -19
  -20
  -22
  -22
  -23
  -25
Free cash flow, $m
  16
  45
  49
  53
  56
  60
  65
  69
  74
  79
  84
  89
  94
  100
  106
  112
  118
  125
  132
  139
  147
  154
  163
  171
  180
  189
  199
  209
  219
  230
  242
Issuance/(repayment) of debt, $m
  56
  106
  112
  119
  126
  132
  139
  145
  152
  158
  165
  171
  178
  185
  192
  200
  208
  216
  225
  234
  243
  253
  264
  275
  287
  299
  313
  326
  341
  357
  373
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
  106
  112
  119
  126
  132
  139
  145
  152
  158
  165
  171
  178
  185
  192
  200
  208
  216
  225
  234
  243
  253
  264
  275
  287
  299
  313
  326
  341
  357
  373
Total cash flow (excl. dividends), $m
  71
  151
  161
  172
  182
  193
  204
  215
  226
  237
  248
  260
  272
  285
  298
  312
  326
  341
  357
  373
  390
  408
  426
  446
  467
  489
  511
  535
  560
  587
  615
Retained Cash Flow (-), $m
  -2
  -33
  -36
  -38
  -40
  -42
  -44
  -46
  -48
  -50
  -52
  -54
  -57
  -59
  -61
  -63
  -66
  -69
  -71
  -74
  -77
  -80
  -84
  -87
  -91
  -95
  -99
  -104
  -108
  -113
  -118
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
 
  117
  126
  134
  142
  151
  160
  168
  177
  187
  196
  206
  216
  226
  237
  248
  260
  272
  285
  299
  313
  327
  343
  359
  376
  393
  412
  432
  452
  474
  496
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
 
  112
  114
  115
  116
  115
  113
  111
  107
  103
  98
  93
  87
  81
  74
  67
  60
  54
  47
  41
  35
  29
  24
  20
  16
  12
  10
  7
  5
  4
  3
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 57.8
Price to Sales 0.7
Price to Book 1.4
Price to Tangible Book
Price to Cash Flow 5.3
Price to Free Cash Flow 5.5
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 13.9% 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 10 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 21.749 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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COMPANY NEWS

▶ United Insurance posts 1Q profit   [May-09-17 06:04PM  Associated Press]
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▶ This Year Is Ideal for Beaten-Stock Strategy   [12:16AM  at The Wall Street Journal]
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Stock chart of UIHC Financial statements of UIHC Annual reports of UIHC
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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