Goosehead Insurance, Inc. (NASDAQ: $GSHD) is one of the fastest-growing insurance companies in the US. It is a full-service insurance agency representing over 140 insurance companies that underwrite small commercial lines and personal lines risks. Its networks include nine corporate sales offices and over 1400 contracted and operating franchises.
On Wednesday, February 21, 2024, Goosehead Insurance released its fourth-quarter financial results to a negative market reception.
Goosehead Insurance Reports Strong Q4 Financial Results
The insurer reported robust financial results for the fourth quarter. Its total written premiums increased 29% to $756 million in Q4. Goosehead Insurance also saw a 16% Y/Y increase in policies in force to around 1,486,000.
Total revenue increased 10% Y/Y in Q4 to $63 million, missing estimates of $71.73 million, while core revenues increased 10% Y/Y to $56.9 million.
Net income in the fourth quarter also significantly increased to $5.4 million, compared to $2.6 million the previous year. EPS for the quarter came in at $0.15, a 650% increase, while adjusted EPS increased 155% to $0.28, missing estimates by $0.05.
Goosehead had a net income margin of 9%, while adjusted EBITDA came in at $14.1 million, compared to the $11.9 million adjusted EBITDA the previous year. The company’s adjusted EBITDA margin grew by 1% Y/Y to 22%.
For the full year, total revenue grew 25% to $261.3 million, core revenue increased 24% to $233 million, and total written premiums grew 34% to $3 billion. The FY23 net income rose to $23.7 million, compared to $2.6 million in FY22, and adjusted EBITDA margin for the year increased by 90% to $69.8 million, reaching 27%.
Financial Health
At the end of 2023, Goosehead Insurance had $44 million in cash and cash equivalents. Additionally, it had an unused line of credit of $49.8 million, signaling a solid liquidity position. Its outstanding notes payable balance came in at $77.5 million.
Upbeat Guidance
Management provided upbeat guidance for FY24. They expect total written premiums of $3.7-$3.85 billion, a 25%-30% growth compared to $3 billion in FY23.
Goosehead Insurance expects total revenue for FY24 to grow 19%-22% or $320-$320 million, compared to $261.3 million in FY23.
The company forecasts contingent commissions of 35 basis points of total written premiums in FY24 and an expanded adjusted EBITDA margin.
Goosehead Insurance (GSHD) Stock Performance
Despite the solid financial results, Goosehead Insurance stock declined during trading hours on Thursday, February 22, 2024. The stock was down 20.42% as of 01:17 PM EST at $70.04 per share.
The decline in the stock’s performance can be attributed to the revenue and earnings miss in Q4, which outweighed the upbeat guidance.
GSHD stock is trading at a discount to its 52-week high of $92.76, below its 50-day moving average of $77.38, and close to the 200-day moving average of $70.04 per share. Year-to-date, the stock is down 4.63%, compared to the 7.07% gain of the S&P 500 Index in the same period.
GSHD Stock Forecast
According to the analysis of six Wall Street analysts, the average price of GSHD stock is $83.17, with the most bullish predicting $105, while the most bearish predicts $41. Based on the most recent price, the analysts’ average price is an 18.45% upside.
Should You Buy Goosehead Insurance Stock?
Goosehead Insurance operates on a unique model connecting insurance companies with small businesses and individuals. While the company enjoyed great success in 2023, that has not been enough to sway investors after the recent revenue and earnings miss.
Additional pressure may have come from the company’s recent announcement that the CEO, Mark Jones, was transitioning to Executive Chair. In his place, the current COO, Mark Miller, will take over. The last time the company had a major leadership change was in mid-September 2022; the stock lost over 20% of its value in one week.
Goosehead is still growing, as evidenced by its most recent results. However, its revenue and earnings miss made it harder to justify its high multiples, including a forward P/E ratio of 51.55. Despite this, Goosehead has a solid foundation for increased profitability and growth, which long-term investors might find lucrative.
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