What is HRTG's Intrinsic value?

Heritage Insurance Holdings Inc (HRTG) Intrinsic Value Analysis

Executive Summary

As of April 1, 2026, Heritage Insurance Holdings Inc's estimated intrinsic value ranges from $69.78 to $83.15 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $69.78 +165.8%
Dividend Discount Model (Stable) $83.15 +216.8%

Is Heritage Insurance Holdings Inc (HRTG) undervalued or overvalued?

With the current market price at $26.25, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Heritage Insurance Holdings Inc's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.61 0.65
Cost of equity 6.7% 8.5%
Cost of debt 5.0% 5.0%
Tax rate 10.6% 17.6%
Debt/Equity ratio 0.12 0.12
After-tax WACC 6.4% 8.1%

Valuation Methods

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.6%
  • Long-term growth rate: 1.0%
  • Fair value: $69.78 (165.8% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.5% (Low) to 6.7% (High)
  • Long-term growth rate: 0.5% (Low) to 1.5% (High)
  • Fair value range: $55 to $111
  • Selected fair value: $83.15 (216.8% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $806M
Enterprise Value $341M
Trailing P/E 4.12
Forward P/E 4.11
Trailing EV/EBITDA 0.00
Current Dividend Yield 0.12%
Dividend Growth Rate (5Y) -73.43%
Debt-to-Equity Ratio 0.12

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Dividend Discount Model (Multi-Stage) 57% $13.96
Dividend Discount Model (Stable) 43% $12.47
Weighted Average 100% $75.51

Investment Conclusion

Based on our comprehensive valuation analysis, Heritage Insurance Holdings Inc's intrinsic value is $75.51, which is approximately 187.6% above the current market price of $26.25.

Key investment considerations:

  • Conservative capital structure (Debt/Equity of 0.12)

Given these factors, we believe Heritage Insurance Holdings Inc is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.