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Federated National (FNHC) Hits Fresh Highs: Is There Still Room to Run?

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Have you been paying attention to shares of Federated National Holding (FNHC - Free Report) ? Shares have been on the move with the stock up 35.6% over the past month. FNHC hit a new 52-week high of $24.03 in the previous session. Federated National Holding has gained 41.3% since the start of the year compared to the -2.4% move for the Finance sector and the -1.6% year-to-date return for its peer group.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, having beaten the Zacks Consensus Estimate in each of the last four quarters. In its last earnings report on May 7, 2018, Federated National Holding reported EPS of $0.64 vs.the Zacks Consensus Estimate of $0.4 while it beat the consensus revenue estimate by 6.28%.

For the current fiscal year, Federated National Holding is expected to post earnings of $2.25 per share on $363.11 million in revenues. This represents a 275% change in EPS on a -2.49% change in revenues. For the next fiscal year, the company is expected to earn $2.65 per share on $368.48 million in revenues. This represents a year-over-year change of 17.78% and 1.48%, respectively.

Valuation Metrics

Federated National Holding may be at a 52-week high right now, but what might the future hold for FNHC? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Federated National Holding has a Value Score of A. The stock's Growth and Momentum Scores are C and F, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 10.4X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 23.4X versus its peer group's average of 17.6X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Federated National Holding currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 or 2 (Buy) and Style Scores of A or B, it looks as if Federated National Holding passes the test. Thus, it seems as though FNHC shares could still be poised for more gains ahead.

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