Where NI Holdings Inc's (NASDAQ:NODK) Earnings Growth Stands Against Its Industry

When NI Holdings Inc (NASDAQ:NODK) released its most recent earnings update (30 June 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were NI Holdings's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not NODK actually performed well. Below is a quick commentary on how I see NODK has performed.

Check out our latest analysis for NI Holdings

How Well Did NODK Perform?

NODK's trailing twelve-month earnings (from 30 June 2018) of US$17.5m has more than doubled from US$4.6m in the prior year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -7.3%, indicating the rate at which NODK is growing has accelerated. What's enabled this growth? Let's take a look at if it is solely owing to industry tailwinds, or if NI Holdings has experienced some company-specific growth.

Over the past few years, NI Holdings top-line expansion has outstripped earnings and the growth rate of expenses. Though this has caused a margin contraction, it has moderated NI Holdings's earnings contraction. Inspecting growth from a sector-level, the US insurance industry has been growing its average earnings by double-digit 10.1% in the prior twelve months, and a more muted 6.7% over the last five years. This growth is a median of profitable companies of 25 Insurance companies in US including ACMAT, Heritage Insurance Holdings and Everest Re Group. This means whatever tailwind the industry is benefiting from, NI Holdings is capable of leveraging this to its advantage.

In terms of returns from investment, NI Holdings has fallen short of achieving a 20% return on equity (ROE), recording 6.6% instead. However, its return on assets (ROA) of 4.0% exceeds the US Insurance industry of 2.0%, indicating NI Holdings has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for NI Holdings’s debt level, has declined over the past 3 years from 11.8% to 7.1%.

What does this mean?

Though NI Holdings's past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as NI Holdings gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research NI Holdings to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for NODK’s future growth? Take a look at our free research report of analyst consensus for NODK’s outlook.
2. Financial Health: Are NODK’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2018. This may not be consistent with full year annual report figures.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.