http://www.bidnessetc.com/64282-patriot-national-inc-falls-o…
explanation of stock drop
14 reviews (which is a small enough number that one person could have written them all).
So true. Wish everybody understood that.
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So based on that they sold off 25%, down to a PE of 5.8
Recent quarterly earnings missed estimates by nearly 23% (non-GAAP).
Also… PN reported 4th quarter diluted losses (ex-items) of $0.19 per share, missing last year’s same period results by 46.52%.
What explains these away. Not the call transcript. What am I missing?
Seems early to jump on a sub $10 stock.
Bob
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They started the year with relationships with 17 insurance carriers. At their January 2015 IPO they grandiosely predicted they’d sign 32 more during the year (almost tripling). Well, they signed 122 (!) additional carriers during the year, bringing them to 139 carriers they represent.
My superficial first reaction was how many more carriers can there be?
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My superficial first reaction was how many more carriers can there be?
Hi RHin, You are missing the point. Among other things they are running an insurance exchange. When a business wants to buy workers comp or other related insurances, they go to PN’s exchange and get multiple quotes and other parameters from multiple insurance companies. Thus the more insurance companies you have in your exchange, the more choice you can give businesses. What brings in the money however is the commissions from the businesses and brokers. And thus it’s a virtuous circle. More insurance companies brings in more brokers, which brings in more businesses as clients, which makes even more insurance companies want to get part of the action, which brings in more brokers, which brings in more business clients, which…
Saul
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Thanks for the explanation, Saul. I can appreciate a virtuous circle. I guess what I was assuming that there are not thousands of insurance companies in the workers comp field, and that 139 carriers could already be a substantial fraction of the total. That could mean that growth through adding carriers has an upper limit on the horizon. However it sounds like the key to growth is customers using the exchange, and there is no shortage of companies needing workers comp coverage. Sounds interesting for sure.
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how many more carriers can there be?
That is a good question RHinCT, but agree with Saul’s comment that it is not the limiting factor on PN’s growth. On the previous earnings call they were very excited to have won a new customer with Missouri Employers Mutual, who is the state’s largest writer of worker’s compensation. This is the FIRST state bid they ever made and they won. That leaves a whole lot more to grow into. Also, as you pointed out their forecast for new carriers in 2015 was exceeded many times. The CEO said they did not expect so many to join the Patriot National network which also points to they might really have a great business model that is better than any of the competition.
I get the feeling that the insurance industry is VERY fractured by differences in state regulations and by many small local companies. With the rate of PN acquisitions, I think the CEO knows the bigger he is the better the service he can offer companies. While trying to locate the answer to your question I see the insurance industry is broken up into Life and Health L/H and Property and Casualty (P/C) sectors. In many states, the Gov’t itself is the largest writer of worker’s compensation insurance. The best I found was at
http://www.naic.org/state_report_cards/report_card_wa.pdf
it had some US level numbers showing about 1 million insurance agencies of which there are about 450,000 Direct Property and Casualty Insurers. There are also about 1 million insurance agencies and brokerages.
It’s a state by state business and PN has shown they have the desire and the ability to compete across the nation.
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Are they trying to hint that they will be open to be bought out?
http://finance.yahoo.com/news/patriot-national-updates-2016-…
Management and the Board committee will assess the potential merits of initiatives for alignment with the Company’s value creation strategy, will evaluate any unsolicited proposals, and may engage third party advisors, as appropriate. The Company previously engaged a financial advisor to assist in exploring opportunities that may accelerate value creation, and that engagement will continue, if it proves to be useful, under the guidance of the Board committee.
Are they trying to hint that they will be open to be bought out?
Hi jdc,
I was wondering the same thing. I wrote to investor relations yesterday but haven’t received an answer yet.
Saul
Wow, I have no idea how to account for this much weakness in PN. I’m just glad it’s one of my small positions instead of a large one!
Saul
Wow, I have no idea how to account for this much weakness in PN. I’m just glad it’s one of my small positions instead of a large one!
I haven’t looked at this company in detail. But the negative comments about the CEO give me great pause. BOFI is still fresh in my mind, and after what happened at BOFI, I resolved to not invest in companies where I can’t trust the management. Sure, the online reviews on PN may be just one person, but I’d rather put my money in companies where I feel really good about the leadership.
Chris
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Could that wording apply just as well to acquisitions? They have a history of doing that. Couldn’t an unsolicited proposal be to “please buy me out” from some other company that is shopping themselves around? Taken from today’s press release:
As we move forward into 2016, our near-term objectives include increasing organic growth through cross-selling and offering more choices to agencies and carriers, as well as enhancing our platform and technology capabilities with a few surgical acquisitions. Furthermore, with the integration of our 2015 acquisitions behind us, we expect margins to expand as our Adjusted EBITDA grows faster than revenue. We can achieve our 2016 plan without raising additional capital.
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Saul, I was kind of expecting to see this drop before the price rises again. My guess is that this is still a reaction to the big drop last Thursday. A lot of people don’t watch their investments daily so it must have been a big shock to see one had dropped more than 25%, especially at a time when their whole portfolio is already way down. Queue panic selling. For a micro-cap stock like PN, that reaction has a big effect on the price.
The stock price also suffers from a lack of news about the company. Every indication I see is that the company is healthy and ready to make fantastic profits, but we have no news confirming that fact since earnings. Easy to be fearful when not hearing any new good news!
Patriot Nation also has a product which it is hard to get excited about which further delays stock price recovery.
I think of it like this:
(Recent big stock price drop)
+ (No good news)
+ (Boring Product)
= (Continued stock price drop)
I am concerned there is a problem I haven’t seen, but for now I am content to wait at a minimum until the next earning’s release before I begin to worry. (Unless, of course, there is new company-related news that changes the story) I may even buy a bit more if the stock continues to fall with no bad news.
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I wonder if there is something we are missing. Wall street is famous for overreacting but when I see drops of 40% in a couple of days in a stock that was not a high flier to start with I do get concerned as to what I am missing.
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Maybe it’s got the same issue as XPO – wall street won’t believe until the profits are shown on the bottom line?
Yes. It’s very stressful when there is no apparent reason to justify the large price drop. It’s difficult to not make decisions based on price movement when there is no other information available. I take my stress as a clear indicator that I’m too heavily weighted in the stock.
What are your experiences with investor relations for various companies? Do they typically ignore questions emailed to them? I’d suspect they would have to ignore you to avoid giving inside information?
I’ve been following the discussions regarding PN and, earlier, BOFI. It saddens me whenever investors lose money. I consider banks/financial institutions to be dangerous.
I didn’t always think that. From 2000 to 2007 I actually held sizable positions in Citi and WAMU. They served me well. Both were growing fast and paying good dividends. Luckily, I started getting queasy about these positions when the housing market began to mystify me. I simply couldn’t understand how folks were able to afford the rapidly escalating house prices. I bailed. Not long after, Lehman Brothers (one of the oldest and most venerable investment houses) collapsed. Then the whole global financial industry collapsed. It was only then that I came to learn that I, as an individual investor with limited research resources, could never properly evaluate a financial institution. I was shocked to learn of Lehman’s off-balance sheet accounting. I was shocked to learn of all the (un-funded) credit default swaps, I was shocked to learn how credit rating agencies granted AAA ratings to absolute junk.
Bailing on Citi and WAMU proved to be profitable moves, but my portfolio was still torpedoed as a consequence of the ensuing financial meltdown. I didn’t sell. I rode out the storm. But, as a consequence, I swore off investing in banks/financial institutions. I consider them to be black boxes. I need far more visibility if I am to risk my capital.
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CALL them up. IMO, a person has no business investing in small/micro-caps if they’re reluctant to phone a company and ask questions.
Do your homework first (e.g., listen to the conf. call), so you can ask something more intelligent than, “Hey, why’s the stock down?”
The company rep may not have much to say, but that’s not my point. You never know until you ask.
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Capital Cube posted an analysis of PN’s 2015 year end earnings yesterday.
http://www.capitalcube.com/blog/index.php/patriot-national-i…
Note while FY2015 revenue rose from $117 to $209, earnings dropped from $10.41 to -5.38, giving them earnings growth of -151.61 versus +268.35 in 2014. ROE was down -18.46. That probably accounts for the drag on the share price. Capital Cube attributed the earnings decline to margin decreases and “unusual” one-time items.
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Invest wisely my friends
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That’s odd. Is Capital Cube reputable? I’ve never heard of them. Here is the quarterly adjusted diluted EPS I have from the last 6 quarters’ of press releases:
0.17 0.10 0.18 0.18 0.23 0.19
So I’m guessing the -5.38 is GAAP?
I only have a 1% position currently so certainly not married to PN. Not that I should be married to any stock. 
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