Rating Change #2

HCC Insurance Holdings ( HCC) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, poor profit margins and disappointing return on equity.

Highlights from the ratings report include:
  • HCC INSURANCE HOLDINGS INC's earnings per share declined by 33.9% 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, HCC INSURANCE HOLDINGS INC reported lower earnings of $2.99 versus $3.11 in the prior year. For the next year, the market is expecting a contraction of 11.0% in earnings ($2.66 versus $2.99).
  • The gross profit margin for HCC INSURANCE HOLDINGS INC is currently extremely low, coming in at 12.90%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 8.30% is above that of the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Despite the fact that it has already risen in the past year, there is currently no conclusive evidence that warrants the purchase or sale of this stock.
  • HCC's debt-to-equity ratio is very low at 0.09 and is currently below that of the industry average, implying that there has been very successful management of debt levels.

HCC Insurance Holdings, Inc., together with its subsidiaries, provides property and casualty, surety, group life, accident, and health insurance coverage, as well as related agency and reinsurance brokerage services to commercial customers and individuals worldwide. The company has a P/E ratio of 11.2, equal to the average insurance industry P/E ratio and below the S&P 500 P/E ratio of 17.7. HCC has a market cap of $3.5 billion and is part of the financial sector and insurance industry. Shares are up 4.8% year to date as of the close of trading on Thursday.

You can view the full HCC Ratings Report or get investment ideas from our investment research center.

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