Goosehead Insurance, an insurance company that is nearing a buy point, is today's selection for IBD 50 Stocks To Watch
Shares fell after third-quarter results were announced Oct. 26 but have found support at the 50-day moving average this month.
Goosehead is forming a double-bottom base with a 75.68 buy point, according to IBD MarketSmith. The stock briefly rose above that level Tuesday but closed below it.
The Composite Rating is 93 while the EPS Rating is a perfect 99. The Relative Strength Rating is 98. In its group, the stock boasts the best RS Rating, exceeding more established players such as Kinsale Capital Group and Arch Capital Group.
The property and casualty insurance industry group is ranked No. 42 out of 197, up from No. 77 one month ago. Higher interest income and fewer major catastrophes have helped the industry's performance.
Goosehead's sales growth has ranged between 23% and 43% over the past seven quarters. Total written premiums grew 30% in Q3 from the prior-year quarter.
Earnings growth has been more uneven. In the third quarter, earnings per share of 46 cents showed a 92% increase. EPS rose 83%, 325% and 156% the previous three quarters, according to MarketSmith.
For the full year, the insurance company maintained its outlook and expects total underwriting premiums to reach $2.96 billion at the midpoint of forecasts. The midpoint of its revenue estimate of $264 million for the full year indicates 26% growth.
Insurance Company Outlook Strong
Wall Street estimates 140% growth in earnings to $1.32 per share in 2023 followed by 31% growth in 2024 to $1.73 per share.
Goosehead is in the property and title insurance group, which holds 73rd place among IBD's 197 industry groups. The company provides different property and title insurance products, such as auto and home insurance as well as casualty protection against floods and other disasters.
Goosehead operates two channels: The corporate channel runs company-owned and financed operations while the franchise channel has a network of independent operators.
The insurance company went public in April 2018 at 10 per share, and the stock reached an all time high 181.30 in October 2021. It bottomed at 29.23 in October 2022.
Mutual funds own 78% of shares outstanding. More funds have added GSHD over the past two quarters. The Virtus KAR Mid-Cap Growth ETF (PHSKX) and the Wasatch Micro Cap Fund (WMICX) hold shares of GSHD.
Exchange traded funds that own the insurance company include iShares S&P Small Cap 600 Growth ETF and the Invesco Dorsey Wright Financial Momentum ETF.
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