National Interstate Corp (NASDAQ:NATL)

CAPS Rating: 2 out of 5

The Company operates as an insurance holding company group that underwrites and sells traditional and alternative risk property and casualty insurance products to the passenger transportation industry and trucking industry, general commercial insurance.

Recs

2
Player Avatar TMFEldrehad (99.99) Submitted: 11/29/2006 5:58:48 PM : Outperform Start Price: $25.52 NATL Score: +5.89

Much like my call on PHLY, this pick is as much of a learning exercise for me as it is anything else - as I know very little about this business or industry. That said, here's what I do know:

For the period of FY2001 through FY2005, this company grew briskly. Compounded revenue growth clocked in at about 28% per year, operating cash flow at 33% per year, and normalized dilluted EPS at a lofty 119% per year. Admittedly, that 119% growth rate is a bit misleading as over the past two years the compounded growth rate clocked in at a much more sedate 11% or so, but it still looks like a fairly robust growth story.

Based on analyst estimates of $1.95 EPS over the coming four quarters, at my CAPS buy-in price of $26.00 per stub, I'm getting a forward P/E of about 13.3. Given the growth history above, as with PHLY, that's looking a little too juicy to pass up from a CAPS standpoint at least.

Again, I know precious little about this company or this industry, so I'm certain that there are a lot of very important factors that I'm completely overlooking here. Over time, as a result of making this pick, I'm hoping to learn what those things are and in turn become a better investor for it.

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Member Avatar TMFSpiffyPop (99.30) Submitted: 1/24/2007 1:07:39 PM
Recs: 0

Russell, good call so far! And a nice day for this stock... up 20%. --David

Member Avatar TMFEldrehad (99.99) Submitted: 1/24/2007 1:47:55 PM
Recs: 0

Thanks for the compliment! Though as of this writing I'm still a little upside-down on this one. The 20% pop today is sure helping to get this one a lot closer to turning around.

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