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Rating Change Detail - HCC INSURANCE HOLDINGS, INC. (HCC) - 3/11/2010
The stock was downgraded from Strong Interest to Some Interest on 3/11/2010 by the Low PE Investor Strategy based on the principles of John Neff. The score according to this strategy fell from 100% to 81%. A full detailed analysis of HCC using this strategy is included below. For a full detailed analysis of HCC using 12 proven strategies of Wall Street Legends, take a free trial to Validea.com

Detailed Analysis of HCC INSURANCE HOLDINGS, INC. (HCC)

Strategy: Low PE Investor - Based on: John Neff

P/E RATIO: [PASS]

The P/E Ratio for non-cyclical companies must between 40% and 60% below the Market PE. The current market PE is 22.00 so the acceptable PE range for this criteria is from 8.80 to 13.20. The current PE Ratio for HCC is 9.17, therefore, it passes this criterion.

EPS GROWTH: [PASS]

For dividend payers, this strategy likes to see a historical earnings growth rate between 7% and 20%. The historical EPS growth rate for HCC is 10.7%, based on the average of the 3, 4 and 5 year historical eps growth rates, therefore, it passes this criterion.

FUTURE EPS GROWTH: [FAIL]

The historical growth rate should be confirmed by the consensus future growth estimate of analysts for both the current fiscal year and the long term. As a result, both growth rates must be greater than 6% for dividend paying stocks. The projected future EPS growth rate for HCC is -5.8% for the current year and 8.8% for the long term, therefore, it fails this criterion.

SALES GROWTH: [PASS]

This methodology requires that earnings growth be fueled by a corresponding growth in sales. As a result, sales growth must be either greater than 7% or at least 70% of EPS growth. The sales growth rate for HCC is 9.1%, based on the average of the 3, 4 and 5 year historical sales growth rates, therefore, it passes this criterion.

TOTAL RETURN/PE: [PASS]

This strategy prefers stocks whose total return (eps growth + yield) divided by the PE ratio is at least double that of the market or of its industry. This methodology would consider the Total Return/PE ratio for HCC of 1.37, based on the average of the 3, 4 and 5 year historical eps growth rates, to be acceptable because it is more than double the market average Total Return/PE ratio of 0.55 or the industry Total Return/PE Ratio of 2.50.

The following criteria are minor criteria and count for substantially less points than the major criteria above. Failing these criteria will not prevent a stock from receiving strong interest.

FREE CASH FLOW: [PASS]

Positive Free Cash Flow gives a company many options to pay dividends, buy back stock, or acquire other companies. As a result, this methodology likes to see positive Free Cash Flow. The Free Cash Flow for HCC is $4.65, thus it passes this criterion.

EPS PERSISTENCE: [PASS]

Neff likes companies to have persistent quarterly earnings. Earnings in each of the past 4 quarters should have increased from the quarter a year before. One dip in earnings is allowed, but the growth for the current quarter must be positive. Quarterly earnings per share for the most recent 8 quarters from earliest to most recent were 0.69, 0.79, 0.50, 0.62, 0.73, 0.81, 0.83, 0.74. Earnings for HCC have increased over each of these one year periods, so the company passes this criterion.

For a full detailed analysis of HCC using 12 proven strategies of Wall Street Legends,
take a free trial to Validea.com

Rating Change Detail - HCC INSURANCE HOLDINGS, INC. (HCC) - 3/11/2010

Detailed Analysis of HCC INSURANCE HOLDINGS, INC. (HCC)

Strategy: Low PE Investor - Based on: John Neff