• Wondering if HCI Group at around US$154 per share still offers value, or if most of the opportunity is already priced in.
• The stock has been choppy recently, with a 2.1% decline over the last 7 days, a 1.1% gain over the last month, and returns of 6.2% over 1 year and very large gains over 3 and 5 years.
• Recent coverage around the stock has focused on its long run-up over the past few years and how sentiment has shifted as the year to date return stands at a 15.8% decline. Together, these moves have put more attention on whether the current share price still lines up with the underlying business.
• Simply Wall St's valuation model currently gives HCI Group a value score of 5 out of 6, which sets the stage for comparing different valuation approaches next and then looking at an even broader way to think about value by the end of this article.

Approach 1: HCI Group Excess Returns Analysis

The Excess Returns model looks at how much profit HCI Group generates on shareholders' equity above its estimated cost of that equity. Instead of focusing on cash flows, it asks whether each dollar invested in the business is earning more than investors require as compensation for risk.

For HCI Group, the model uses a Book Value of $80.13 per share and a Stable EPS of $29.60 per share, based on the median return on equity over the past 5 years. The implied Cost of Equity is $7.44 per share, which leads to an Excess Return of $22.16 per share. That is supported by an Average Return on Equity of 28.28% and a Stable Book Value estimate of $104.65 per share from 2 analysts.

These inputs feed into Simply Wall St's Excess Returns framework, which projects future excess profits and discounts them back to arrive at an intrinsic value of about $725.77 per share. Compared with the current price around US$154, the model implies the stock is 78.7% undervalued.

Result: UNDERVALUED

Our Excess Returns analysis suggests HCI Group is undervalued by 78.7%. Track this in your watchlist or portfolio, or discover 51 more high quality undervalued stocks.

Approach 2: HCI Group Price vs Earnings

For a profitable company like HCI Group, the P/E ratio is a useful shorthand for how much investors are paying for each dollar of earnings. A higher or lower P/E often reflects what the market expects for future earnings and how much risk investors see in those earnings.

In general, stronger growth and lower perceived risk can support a higher P/E, while slower growth or higher risk usually means a lower, more cautious multiple. These expectations are what make a given P/E feel “normal” or “fair” for a stock.

HCI Group currently trades on a P/E of 7.01x. That sits below the Insurance industry average of 11.45x and below the peer group average of 9.99x. Simply Wall St also calculates a “Fair Ratio” for the stock of 9.15x, which estimates what HCI Group’s P/E might be given its earnings growth profile, industry, profit margins, market cap and risk factors.

This Fair Ratio is more tailored than a simple peer or industry comparison because it adjusts for company specific factors rather than assuming all insurers should trade on the same multiple. Comparing 9.15x with the current 7.01x suggests the stock is trading below that Fair Ratio.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your HCI Group Narrative

Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St you can use Narratives, where you set a story for HCI Group that ties your view on things like future revenue, earnings, margins and a fair value into one forecast. You can then compare that Fair Value with today’s price to decide whether the stock looks attractive or expensive. Narratives on the Community page update automatically when new information such as dividend announcements or analyst forecasts come through. For example, one HCI Group Narrative might be cautious and closer to the US$138.75 fair value, while another might be more optimistic and closer to US$245, each giving you a clear, quantified version of a different viewpoint.

For HCI Group however we will make it really easy for you with previews of two leading HCI Group Narratives:

Narrative fair value: US$245.00 per share

Implied discount to this fair value: about 36.8% compared to the last close around US$154.78

Analyst revenue growth assumption: 8.85% per year

• Focuses on Exzeo technology and disciplined underwriting as key drivers behind lower loss ratios and higher net margins over time.
• Builds in revenue growth supported by expansion beyond Florida and a potential Exzeo IPO, with analysts using a discount rate of about 7.0% to value those cash flows.
• Notes an assumption of a higher future P/E multiple on 2029 earnings compared with today, while also flagging concentration in Florida, reinsurance costs and Exzeo separation risks as important watchpoints.

Narrative fair value: US$138.75 per share

Implied premium to this fair value: about 11.5% compared to the last close around US$154.78

Analyst revenue growth or related assumption used in this view: 23.4%

• Centres on the dividend profile, with a US$0.40 quarterly dividend, a yield around 1.8% and a low payout ratio that leaves room for flexibility if earnings change.
• Highlights a long record of dividend stability and average annual increases of 4.8% over the past decade, alongside current net profit margins that sit above the broader insurance sector figure provided.
• Points out that earnings per share are expected to decline by 6.7% over the next year, which this narrative treats as a key constraint when weighing the current share price against its own fair value estimate.

Do you think there's more to the story for HCI Group? Head over to our Community to see what others are saying!

This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.