Tiptree’s common shares will need to reach $28 to achieve average annual stock market performance of 9.0% over the next 6 years. Tiptree’s stock price will need to reach $33 by 2028 to achieve upper quartile performance. What is the market’s view of Tiptree’s future operating performance as reflected in the current price of $17?
Executive Summary
- Key Tiptree characteristics: above average expected growth, above average financial strength, average profitability, and low stability. Growth is a big positive influence on Tiptree’s valuation while Risk Profile is a big negative influence.
- Very high valuation, above market shareholder returns. Current valuation levels are very high relative to the Tiptree Peer Group. Recent market returns have outperformed the Tiptree Peer Group. Total shareholder returns expected to significantly lag the overall equity market. Based on current investor expectations, Tiptree shares should reach a level of $19 by 2028 — an 3.9% per year total shareholder return. A 2028 stock price of $28 would reflect median performance and a price of $33 would be required to reach upper quartile performance.
- Growth has been Tiptree’s biggest valuation strength. Historical growth has been very high relative to the Tiptree Peer Group and forecasted growth is relatively high. Asset Growth, Revenue Growth, and EPS Growth have been superior. These factors have buoyed market perceptions of Tiptree. Tiptree’s historical income statement growth and balance sheet growth have diverged. Revenue growth has paralleled asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity.
- Profitability is slightly above average. The company has very high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
- Tiptree’s risk profile is unfavorable. Overall variability has been very low with very low revenue variability, very high E.P.S. variability, and above average stock price volatility. Financial Strength is relatively high and earnings’ expectations are unavailable. The debt/capital ratio has risen.
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