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Jonathan Poland
Jonathan Poland
Articles (505)  | Author's Website |

Risk-Reward With Health Insurance Innovations

It's America's fastest-growing company, and it's not done

March 06, 2019 | About:

Wednesday, after the closing bell on Wall Street, Health Insurance Innovations (NASDAQ:HIIQ) will report its fourth-quarter and year-end financial results.

The stock is a hot topic considering it was recently named Fortune’s fastest-growing company, an honor it earned by creating a digital platform to purchase health coverage in minutes instead of waiting for paperwork and exchanges. The only problem is that as far a I can tell, it’s not actually web-based. Yes, it has a website, but all the other major insurance agents do too.

However, consumers still cannot sign up for insurance directly on the hiiq.com site. Instead, they have to fill out a form and submit a call back. Now, maybe Health Insurance Innovations is working on that seamless integration, but there’s nothing novel about this company at all other than that, which brings me to the point. It doesn’t need to be.

Like it or not, insurance products are virtually mandatory in American society. This company is simply filling a gap, and making a lot of cash doing so. In 2012, the company did $42 million in sales and $3 million in net income. During the last 12 months leading up to today’s earnings release, it generated $14 million in net income on $283 million in sales. The company’s book value has grown from $1.66 to $5.40, and it spends under 25% of its net income on capex.

Health Insurance Innovations is expected to book revenue of $83 million and earnings of 76 cents per share in the fourth quarter. That’s year-over-year growth of 20% for revenue and 105% for earnings. And, in the last eight quarters, it’s beaten the estimates over 75% of the time.

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Last year was a rough one for the company. It had to face regulatory charges, which it settled. Then, a Texas court ruled that Obamacare is unconstitutional without the individual mandate. And of course, there was the December market correction, which pushed the stock below $30 a share from the high of $61 in September. All that said, the company is still growing, but it’s a bumpy ride.

With a current market capitalization around $600 million, if the company earns $3.00 per share in 2019 and it's priced anywhere close to the industry average multiple (24.4x), shares could easily get back to the $60 range with even more room to run long term.

Disclosure: I am not long or short Health Insurance Innovations.

About the author:

Jonathan Poland
I spent more than 15 years helping DIY investors earn over 30% a year. Today, I help business leaders take those insights and build better assets. I rarely write about stocks that I own. Thanks for reading. Do your own analysis before investing.

Visit Jonathan Poland's Website


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