What happened
Goosehead Insurance (GSHD 0.11%) had a volatile week, with the stock price falling 21.4% from last Friday's close through the closing bell on Thursday.
The stock had dropped from $54.15 to $37.51 on Wednesday afternoon, which was near a 52-week low of $37.35. But it rebounded on Thursday to end the day at $42.58. Year to date, the stock is down about 68%.
It was not a great week overall, as the S&P 500 fell 4.1% through Thursday -- although Goosehead certainly underperformed. Here's why.
So what
Goosehead Insurance has a business model that is a little different from most insurers as it sells insurance through its corporate office, as well as through a network of franchises. As of June 30, it had 1,341 operating franchises, up 25% year over year, and 15 corporate offices. The company has been growing rapidly and since it went public in 2018 for $10 per share, the stock price is up about 325% as of Sept. 15.
NASDAQ: GSHD
Key Data Points
Goosehead had a solid second quarter, with revenue up about 39% year over year, total written premiums up 42% over the prior-year period, and policies in force growing 35% year over year. Net income fell 24% due to a 29% year-over-year increase in operating expenses due to investments in technology, systems, franchises, and employees as the company scales up.
But the market reacted negatively this week to the news that Goosehead's CFO Mark Colby would be "transitioning out of Goosehead and pursuing other opportunities." Colby had been with the company for 10 years. He has been replaced by Mark Jones, who was promoted from VP of finance. The announcement was made on the morning of Sept. 12 and the stock dropped some 21% that day, down to around $42 per share.
Now what
After the Tuesday stock market sell-off, the worst day on the market since June 2020, Goosehead had fallen to a low of $37.51 on Wednesday. But the stock price bounced back, surging 10.9% higher on Thursday to close at $42.58. The catalyst was likely the company reiterating its 2022 guidance, perhaps to reassure the markets that everything remains on track.
The full-year 2022 guidance called for total written premiums to be between $2.152 billion and $2.215 billion -- which would represent growth of 38% to 42%. Also, it reiterated that revenue is expected to be between $194 million and $205 million, which represents 28% to 35% year-over-year growth.
Goosehead remains in growth mode, but take note of the very high multiples with a forward price-to-earnings ratio of 49.
