Heritage Insurance Trades Above 50-Day SMA: What to Do With the Stock?

Shares of Heritage Insurance Holdings, Inc. HRTG have been trading above its 50-day simple moving average (SMA) for quite some time, signaling a short-term bullish trend as well as making it an attractive option for investors from a technical perspective.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.  Image Source: Zacks Investment ResearchThis 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.HRTG Shares Exhibit Solid YTD MomentumShares of HRTG have rallied 76.1% year to date, outperforming the industry’s growth of 24.6%, the Finance sector's return of 16% and the Zacks S&P 500 composite’s rise of 24%.Heritage Insurance Outperforms Industry, Sector & S&P YTDImage Source: Zacks Investment ResearchAverage Target Price for HRTG Suggests a Solid UpsideBased 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 39.4% upside from Wednesday’s closing price.Mixed Analyst Sentiment for HRTGThe consensus estimate for 2024 and 2025 earnings has moved 3.8% and 4.4% south, respectively, in the past 60 days.The Zacks Consensus Estimate for 2024 implies a 23.4% year-over-year decrease, while the same for 2025 suggests a 62.7% increase.Factors Impacting HRTGRate adequacy, selective profit-oriented underwriting criteria and restricting new business in over-concentrated markets or products should drive profitability for Heritage Insurance. The company 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 in December 2022. HRTG focuses on selective underwriting. There has been a decline in policy count, though average premiums per policy increased. However, HRTG expects the headwind from declining policies to begin to moderate over the next few quarters.The excess and supply (E&S) business is another growth lever for Heritage. HRTG stated that it will consider and evaluate growth opportunities in a greater number of states. Its reinsurance program shields Heritage Insurance 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 a combination of 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 the segments that have the potential to yield more profits seems prudent.  In its effort to distribute wealth to shareholders, HRTG recently approved a share repurchase program to buy back $10 million worth of shares through next year.However, the insurer’s debt has increased 2.4% as of Sept. 30, 2024. Leverage compares unfavorably with the industry average while times interest earned too is lower than the industry average.HRTG’s Favorable Return on CapitalReturn 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 RGA’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 AffordableThe stock is undervalued compared to its industry. It is currently trading at a price-to-book multiple of 1.26, lower than the industry average of 1.51. 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 StockA growing commercial residential business, improving E&S business, better pricing, increasing top line, expanding margins and solid earnings bode well for HRTG’s growth. It also carries a VGM Score of A.However, given muted analyst sentiment, unfavorable leverage and times interest earned, it is better to adopt a wait-and-see approach on this Zacks Rank #3 (Hold) stock. Those who own it can retain it in their portfolio while new investors can wait for some more time. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Zacks Naming Top 10 Stocks for 2025Want to be tipped off early to our 10 top picks for the entirety of 2025?History suggests their performance could be sensational.From 2012 (when our Director of Research Sheraz Mian assumed responsibility for the portfolio) through November, 2024, the Zacks Top 10 Stocks gained +2,112.6%, more than QUADRUPLING the S&P 500’s +475.6%. Now Sheraz is combing through 4,400 companies to handpick the best 10 tickers to buy and hold in 2025. Don’t miss your chance to get in on these stocks when they’re released on January 2.Be First to New Top 10 Stocks >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report 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 ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks