I believe so!
Homeowners Choice (HCII) now has a peaking earning potential of $2.08, cash of $8.85 per share and no debt, and Real estate valued at $1.12 per share.
We believe Homeowners Choice has targeted diversified insurance policies throughout the State of Florida, knowing hurricanes can be devastating leaving a high level of damage but also damage is often in a compressed area. Because of Homeowners Choice's state diversification model, we now believe that their hurricane risk in Florida is limited to about the $3 million potential risk. So if you assume only one hurricane hits Florida, we still project earnings to be around the $1.60 range.
It's our contention that profitable companies should trade above the level of cash in the bank. At one hurricane or $1.60 times a PE of $9.42 (the property and casualty industry average), this comes to $15.07; At $2.08 times a PE of $9.42, this would be $18.84.
With cash at $8.85 per share plus $1.12 in real estate, which appears to be overlooked, this gives --say a buyout firm with about $9.97 of mostly liquid assets-- an ability to buy a $6.50 company. Plus, then, they would receive the remaining company that has over $2 in earning power.
We believe this downturn provides a good opportunity to invest in a very profitable company trading well below cash and at about 3.125 peak earnings!
|Valuation Ratios||Company||Industry||S&P 500|
|Price to Sales||0.63||0.99||n/a|
|Price to Book||0.89||0.86||3.41|
|Price to Cash Flow||3.66||7.31||13.18|
|% Owned Institutions||1.61||50.64||n/a|
Disclosure: Durig Capital, Randy Durig, their clients and related accounts have purchased Homeowners Choice with the majority around $8.