Stock Analysis

Goosehead Insurance (NASDAQ:GSHD) shareholders have lost 55% over 1 year, earnings decline likely the culprit

  •  Updated
NasdaqGS:GSHD
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While not a mind-blowing move, it is good to see that the Goosehead Insurance, Inc (NASDAQ:GSHD) share price has gained 23% in the last three months. But that's small comfort given the dismal price performance over the last year. Specifically, the stock price slipped by 55% in that time. Some might say the recent bounce is to be expected after such a bad drop. Arguably, the fall was overdone.

After losing 15% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Though if you're not interested in researching what drove GSHD's performance, we have a free list of interesting investing ideas to potentially inspire your next investment!

We don't think that Goosehead Insurance's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. It would be hard to believe in a more profitable future without growing revenues.

In the last year Goosehead Insurance saw its revenue grow by 30%. That's definitely a respectable growth rate. Meanwhile, the share price tanked 55%, suggesting the market had much higher expectations. It is of course possible that the business will still deliver strong growth, it will just take longer than expected to do it. To our minds it isn't enough to just look at revenue, anyway. Always consider when profits will flow.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

earnings-and-revenue-growth
NasdaqGS:GSHD Earnings and Revenue Growth August 24th 2022

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. So it makes a lot of sense to check out what analysts think Goosehead Insurance will earn in the future (free profit forecasts).

A Different Perspective

Goosehead Insurance shareholders are down 55% for the year (even including dividends), falling short of the market return. The market shed around 13%, no doubt weighing on the stock price. Investors are up over three years, booking 9% per year, much better than the more recent returns. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. It's always interesting to track share price performance over the longer term. But to understand Goosehead Insurance better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Goosehead Insurance (at least 2 which don't sit too well with us) , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

What are the risks and opportunities for Goosehead Insurance?

Goosehead Insurance, Inc. operates as a holding company for Goosehead Financial, LLC that provides personal lines insurance agency services in the United States.

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Rewards

  • Earnings are forecast to grow 142.32% per year

Risks

  • Interest payments are not well covered by earnings

  • Negative shareholders equity

  • Shareholders have been diluted in the past year

  • Profit margins (0.2%) are lower than last year (5.5%)

  • Volatile share price over the past 3 months

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Share Price

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1Y Return

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Further research on
Goosehead Insurance

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About NasdaqGS:GSHD

Goosehead Insurance

Goosehead Insurance, Inc. operates as a holding company for Goosehead Financial, LLC that provides personal lines insurance agency services in the United States.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation0
Future Growth6
Past Performance2
Financial Health1
Dividends1

Read more about these checks in the individual report sections or in our analysis model.

Exceptional growth potential with questionable track record.