GOOSEHEAD INSURANCE INC -A (NASDAQ:GSHD) – A Quality Growth Stock in the Insurance Sector

GOOSEHEAD INSURANCE INC -A (NASDAQ:GSHD) was identified as a quality stock through our Caviar Cruise screening strategy. The company stands out due to strong profitability, consistent growth, and efficient capital allocation. Below, we examine why GSHD meets the criteria for quality investors.

Key Strengths of GSHD

• High Return on Invested Capital (ROIC): GSHD’s ROIC (excluding cash and goodwill) is 26.60%, well above the 15% threshold for quality stocks. This indicates efficient use of capital to generate profits.
• Strong Revenue and EBIT Growth: Over the past five years, revenue has grown at a 19.08% annual rate, while EBIT growth has been even stronger at 34.10%, signaling improving profitability.
• Healthy Debt Management: The company’s debt-to-free cash flow ratio is 4.70, meaning it could repay its debt in under five years using current cash flows—a sign of financial stability.
• Exceptional Profit Quality: GSHD converts nearly all net income into free cash flow, with a five-year average profit quality of 959.07%, far exceeding the 75% benchmark.

Fundamental Analysis Summary

GSHD earns a solid fundamental rating of 6 out of 10, with strengths in profitability and growth. The company outperforms most peers in ROIC and EBIT margins, though its valuation appears expensive with a P/E ratio of 51.56. Analysts expect continued earnings growth of 19.10% annually, which may justify the premium.

Considerations for Investors

While GSHD exhibits strong operational performance, its high valuation and declining dividend yield (-24.29% annual reduction) warrant caution. Quality investors should weigh growth potential against current pricing.

Our Caviar Cruise screener lists more quality stocks and is updated daily. For a deeper dive, review the full fundamental analysis of GSHD.

Disclaimer

This is not investing advice. The observations here are based on current data, but investors should conduct their own research before making decisions.