Analyst Says Seeking Returns From This Insurance Company Is No Wild Goose Chase

Bank of America sees Goosehead Insurance Inc GSHD as a rare sight in the insurance landscape, driving growth — and a Buy rating — with its unique model and reasonable share price.

The Analyst

Bank of America’s Jay Cohen initiated coverage of Goosehead with a Buy rating and $19 price target.

The Thesis

Goosehead is a personal lines insurance brokerage operating on a national scale, the only of its kind according to Cohen. Its unique model makes it a rare growth story among insurers, with compound organic revenue growth exceeding 35 percent over the past three years.

Cohen likes how the company leads with homeowners insurance which is stickier than other lines, keeping customer retention high. Goosehead draws referrals from mortgage brokers and real estate agents.

Goosehead operates through both its own corporate agents and a franchise model. Franchisees are able to tap into the company’s service capabilities and relationships with over 80 carriers.

The franchise model is unique in part because of the way it builds in growth for the company. Goosehead handles renewals for its agents and takes a larger share of renewal commissions, which will expand with the franchise channel.

Cohen expects revenue growth to accelerate moving forward, driving his $19 price target.

Price Action

Shares of Goosehead were roughly flat around $16.29.

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