January 5, 2007

SeaBright Insurance Company

SeaBright Insurance Holdings, Inc. (SEAB), a Zacks #1 Rank stock, topped analysts’ earnings expectations in four out of the past five quarters by an average margin of 16.7%. The company reported solid results for the third quarter and first nine months of the year in late October. Consensus estimates for this year and next have jumped over the past two months. The company has a price-to-book ratio of 1.6, compared to 4.8 for the market. Its PEG ratio currently sits at 0.71.

Full Analysis

SeaBright Insurance Holdings, Inc., through its subsidiary, SeaBright Insurance Company, is a leader in providing quality niche specialty workers' compensation products and services to maritime employers, organized employers requiring collectively bargained workers' compensation insurance, construction contractors and other selected employer segments.

SEAB exceeded analysts’ earnings expectations in four out of the past five quarters by an average margin of 16.7%. In three out of the four quarters, the company surprised by a double-digit percentage.

On Oct 24, SEAB reported third-quarter profits of $9.1 million, or 44 cents per share, compared to profits of $5.1 million, or 30 cents per share in the prior-year period. Furthermore, the result topped the Street’s estimate of 38 cents by a solid 15.8%. Total revenues jumped 19.2% to $52.8 million versus $44.3 million in the third quarter of 2005.

For the first nine months of the year, profits came in at $24.4 million, compared to $12.0 million for the same period in 2005. Total revenues soared 23.6% to $147.8 million from $119.6 million for the first nine months of 2005.

The company’s combined ratio for the quarter, a measure of profitability for insurance companies, was 77.4% compared to 85.0% for the same period in 2005. For the first nine months of the year, the combined ratio was 78.8% compared to 87.1% for the same period in 2005. A ratio less than 100% indicates that the company is turning an underwriting profit, while a ratio greater than 100% indicates one that is paying out more money in claims versus receiving via premiums.

The consensus earnings estimate for this year rose three cents to $1.58 over the past 60 days. Profit forecasts for next year increased by a larger magnitude—eight cents to $1.72 over the same period of time. Earnings per share are projected to grow 15% over the next 3-5 years, while the industry is expected to grow by 14%.

SEAB is currently trading at a valuation of 11.6x trailing 12-month earnings and at 10.6x current fiscal-year estimated earnings. The market, as represented by the S&P 500, is trading at a valuation of 17.3x trailing 12-month earnings and at 15.7x its current fiscal-year estimated earnings. The company has a price-to-book ratio of 1.6, compared to 4.8 for the market. Its PEG ratio currently sits at 0.71.

The company’s return on equity of 15% betters the industry average of 13%.


This company also showed up on a stock screen at Forbes.com as a company with a PEG under 1.0 and positive free cash flow

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