The United States market has shown robust performance recently, climbing 2.2% in the last week and up 33% over the past year, with earnings projected to grow by 15% annually in the coming years. In this thriving environment, identifying stocks with strong fundamentals can be key to uncovering potential opportunities; this article highlights American Coastal Insurance and two other small-cap companies that may fit this criterion.

Top 10 Undiscovered Gems With Strong Fundamentals In The United States

Click here to see the full list of 229 stocks from our US Undiscovered Gems With Strong Fundamentals screener.

We're going to check out a few of the best picks from our screener tool.

American Coastal Insurance

Simply Wall St Value Rating: ★★★★☆☆

Overview: American Coastal Insurance Corporation, with a market cap of $648.84 million, operates in the United States through its subsidiaries, focusing on commercial and personal property and casualty insurance.

Operations: ACIC generates revenue primarily from underwriting commercial and personal property and casualty insurance. The company's financial performance is influenced by factors such as premium income, claims expenses, and investment income. Net profit margin trends can provide insights into its profitability over time.

American Coastal Insurance, a smaller player in the insurance sector, has shown impressive earnings growth of 54.3% annually over the past five years, though its recent 23.2% increase trails behind the industry average of 33.2%. Trading at a price-to-earnings ratio of 7.7x compared to the US market's 19.4x suggests it offers good value relative to peers. Despite an increase in debt-to-equity from 29.7% to 57.4%, interest payments are well covered by EBIT at a ratio of 9.9x, indicating solid financial health amidst strategic moves like reducing quota share and expanding policy offerings despite potential hurricane-related risks and rising costs impacting margins.

• American Coastal Insurance aims to enhance earnings by reducing its quota share, retaining more underwriting profit. Click here to explore the full narrative on American Coastal Insurance's strategic initiatives and growth potential.

Donegal Group

Simply Wall St Value Rating: ★★★★★☆

Overview: Donegal Group Inc. is an insurance holding company that offers property and casualty insurance to businesses and individuals, with a market capitalization of approximately $532.57 million.

Operations: Donegal Group generates revenue primarily from its Personal Lines and Commercial Lines segments, contributing $389.62 million and $536.58 million, respectively. It also earns from net investment income amounting to $43.58 million and records investment gains of $6.97 million.

Donegal Group, a player in the insurance sector, seems to be making strides with a notable earnings growth of 152% over the past year, outpacing the industry average of 33.2%. The company's debt to equity ratio has improved from 9% to 6.8% over five years, indicating better financial health. With net income reaching US$16.75 million in Q3 compared to a loss last year and revenue climbing to US$251.74 million from US$233.93 million, Donegal is showing resilience despite competitive pressures and weather-related risks that could affect profitability. Its strategic focus on modernizing operations and expanding small business underwriting appears promising for future growth prospects.

• Donegal Group aims to lower its expense ratio by 2 points by 2025. Click here to explore the full narrative on Donegal Group's strategic initiatives and market outlook.

Hagerty

Simply Wall St Value Rating: ★★★★★☆

Overview: Hagerty, Inc. is a company that offers insurance agency services on a global scale, with a market capitalization of approximately $1.04 billion.

Operations: Hagerty generates revenue primarily from its insurance brokerage segment, totaling $1.15 billion.

Hagerty, a niche player in the insurance industry, is making waves with strategic partnerships and innovative offerings like Enthusiast Plus. The company's recent financials show promising growth, with third-quarter sales reaching US$165.69 million compared to US$139.79 million last year and nine-month revenue at US$908.31 million against US$755.17 million previously. Despite challenges from market conditions, Hagerty's net income for the nine months rose to US$13.91 million from US$5.66 million a year ago, reflecting improved profitability margins from 1.7% to 2.1%. With a projected annual revenue growth of 14%, Hagerty's future looks bright amidst potential risks such as catastrophic events impacting profitability significantly.

• Hagerty's strategic partnerships, notably with State Farm, and new product offerings are key to its projected revenue growth and profit margin expansion; click here to explore the full narrative on Hagerty's investment potential.

Taking Advantage

• Gain an insight into the universe of 229 US Undiscovered Gems With Strong Fundamentals by clicking here.
• Got skin in the game with these stocks? Elevate how you manage them by using Simply Wall St's portfolio, where intuitive tools await to help optimize your investment outcomes.
• Unlock the power of informed investing with Simply Wall St, your free guide to navigating stock markets worldwide.

Contemplating Other Strategies?

• Explore high-performing small cap companies that haven't yet garnered significant analyst attention.
• Fuel your portfolio with companies showing strong growth potential, backed by optimistic outlooks both from analysts and management.
• Find companies with promising cash flow potential yet trading below their fair value.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include NasdaqCM:ACIC NasdaqGS:DGIC.A and NYSE:HGTY.

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