Shares of Heritage Insurance Holdings, Inc. HRTG have rallied 46% in the past six months, outperforming the industry’s growth of 7.5%, the Finance sector's return of 9.8% and the Zacks S&P 500 composite’s rise of 8.2%. 

This super-regional U.S. property and casualty insurance holding company is poised to gain from prudent underwriting execution and rate adequacy initiatives pursued over the last three years.

Heritage Insurance Outperforms Industry, Sector & S&P YTD

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Shares Trading Below 50-Day Moving Average

Heritage Insurance shares have been trading below its 50-day simple moving average (SMA) for quite some time, signaling a short-term bearish trend.

The 50-day SMA is a key indicator for traders and analysts to identify support and resistance levels. It is considered particularly important as this is the first marker of an uptrend or downtrend. 

Average Target Price for HRTG Suggests a Solid Upside

Based on short-term price targets offered by two analysts, the Zacks average price target is at $16.00 per share. The average suggests a potential 43.8% upside from Friday’s closing price.

Optimistic Growth Projection for HRTG

The Zacks Consensus Estimate for 2025 implies a 62.7% year-over-year increase on 7.4% higher revenues.

Factors Impacting HRTG

Heritage Insurance remains focused on augmenting profitability by selective profit-oriented underwriting criteria, rate adequacy, and restricting new business in over-concentrated markets or products. As part of its growth strategy, HRTG has stopped writing new personal lines policies in Florida and the Northeast, given the waning profitability of the book of business, coupled with tightening reinsurance markets. 

Due to its focus on selective underwriting, HRTG noted a decline in policy count, though average premiums per policy increased.  The insurer expects the headwind from declining policies to begin to moderate over the next few quarters.
Heritage Insurance has identified the excess and supply (E&S) business as a growth driver and is thus evaluating growth opportunities in more states. 

HRTG has a reinsurance program in place that shields it from exposure to hurricanes and other severe weather events in the coastal area. The insurer expects a substantial reduction in the ceded premium ratio, given improvements in the reinsurance program from a cost and structure standpoint and growing gross premiums earned.

Heritage Insurance’s strategy to divert capital toward technology and to segments that have the potential to yield more profits seems prudent.  

As part of wealth distribution to shareholders, HRTG recently approved a share repurchase program to buy back $10 million worth of shares this year.

HRTG’s Favorable Return on Capital

Return on equity in the trailing 12 months was 29.2%, higher than the industry average of 7.6%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.

Its return on invested capital (ROIC) has been increasing for quite some time. This reflects HRTG’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 19.7%, higher than the industry average of 5.8%.

HRTG Shares are Affordable

The stock is undervalued compared to its industry. It is currently trading at a price-to-book multiple of 1.22, lower than the industry average of 1.59. It also has a Value Score of A.

Shares of other insurers like NMI Holdings NMIH, MGIC Investment Corporation MTG and Radian Group RDN are also trading at a multiple lower than the industry average.

Parting Thoughts on HRTG Stock

A growing commercial residential business, improving E&S business, better pricing, increasing top line, expanding margins and solid earnings bode well for HRTG’s growth. Its diversification strategy is bearing fruit, helping it achieve better risk distribution, claims trends and lower reinsurance costs, with no single state accounting for more than 26.7% of total insurable value.

A VGM Score of A instills confidence in the stock.

However, given unfavorable leverage and times interest earned along with a higher debt level, it is better to adopt a wait-and-see approach for this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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MGIC Investment Corporation (MTG) : Free Stock Analysis Report

Radian Group Inc. (RDN) : Free Stock Analysis Report

NMI Holdings Inc (NMIH) : Free Stock Analysis Report

Heritage Insurance Holdings, Inc. (HRTG) : Free Stock Analysis Report

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