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Why National Interstate (NATL) Is Soaring Today

NEW YORK (TheStreet) -- National Interstate (NATL - Get Report) soared Wednesday after American Financial Group (AFG) announced that its wholly-owned subsidiary, Great American Insurance Company, had made a tender offer to buy all outstanding shares of National Interstate's common stock that it does not currently own.

The offer is for $28 a share in cash without interest and expires at midnight on March 6 unless it is extended or terminated prior to that time.

National Interstate closed up 30.85% to close at $29.01 and had a volume of more than 1,278,213, compared to its average of 24,998.

TheStreet Ratings team rates NATIONAL INTERSTATE CORP as a "buy" with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

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"We rate NATIONAL INTERSTATE CORP (NATL) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and good cash flow from operations. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 8.9%. Since the same quarter one year prior, revenues rose by 14.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • NATL's debt-to-equity ratio is very low at 0.03 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
  • Net operating cash flow has increased to $19.84 million or 23.35% when compared to the same quarter last year. In addition, NATIONAL INTERSTATE CORP has also vastly surpassed the industry average cash flow growth rate of -27.66%.
  • Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, NATL has underperformed the S&P 500 Index, declining 22.90% from its price level of one year ago. Despite the stock's decline during the last year, it is still somewhat more expensive (in proportion to its earnings over the last year) than most other stocks in its industry. We feel, however, that other strengths this company displays offset this slight negative.
  • NATIONAL INTERSTATE CORP's earnings per share declined by 19.6% in the most recent quarter compared to the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, NATIONAL INTERSTATE CORP reported lower earnings of $1.75 versus $1.81 in the prior year. For the next year, the market is expecting a contraction of 63.4% in earnings ($0.64 versus $1.75).
  • You can view the full analysis from the report here: NATL Ratings Report

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