Hilltop Holdings

Hilltop Holdings Inc receives a 3-star quantitative star rating, indicating our belief that this share class is a balanced choice, but prudent investors should consider looking elsewhere. The stock currently trades at a 6% discount to our quantitative fair value estimate of $40.55 per share; however, caution is warranted due to this estimate's high uncertainty rating.

The firm's valuation metrics bolster our estimated fair value. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. For example, the firm's book value yield of 96.5% sits in the top 30% globally. The market price is low relative to the book (accounting) value of the company's equity, which contributes to our view that shares are cheap.

On a different note, the company's lack of growth is potentially concerning. Stagnant revenue and earnings growth indicates a company's challenges in increasing market share and profitability. The firm's revenue 5-year growth of -8.7%, for example, sits in the bottom 10% globally. Weak trailing five-year revenue growth is disappointing and could indicate trouble generating future value for shareholders, which, despite our favorable price/fair value ratio, is a negative attribute.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has outperformed the broader universe over the past year. While we believe the stock is undervalued, this outperformance had a negative impact on our valuation estimate.

With its quantitative economic moat rating of none, we do not expect this company to materially outearn its cost of capital in the long run. However, its financial health score is strong, suggesting that the company should be well positioned to weather tough times.