EverQuote serves as a lead generator site and insurance marketplace for large insurance companies.
Even though the activity on the website sounds a bit spammy, the insurance platform is accredited by the Better Business Bureau, so site visitors do not have to worry about getting scammed. EverQuote, which was accredited in 2011 by the BBB, has a B rating. EverQuote is based in Cambridge, Massachusetts.
That still does not mean guests on the site will necessarily get the best insurance rate. However, they can look at pricing, do receive follow-up calls, locally, on their inquiries, or are linked to an insurance company’s website.
What Is The EverQuote Customer Experience Like?
New users answer several questions on the EverQuote site after selecting the insurance product they are seeking – auto, life, health, home, business, or renter’s coverage.
EverQuote has aligned itself with major insurance providers, such as Liberty Mutual, Nationwide, Progressive, and Allstate.
While the platform offers you quotes from its partnered providers, the rates are determined from the rates of drivers with a similar profile as the inquirer. Therefore, you still need to speak to the insurer to learn the actual rate.
How EverQuote Makes Money
EverQuote (EVER) receives its revenues by selling consumer referrals to insurance providers made up of indirect distributors, insurance agents, or carriers.
Three customer formats are used:
1. Online-to-online referrals direct consumers to the insurance company’s website.
2. Online-to-offline referrals represent leads where the customer’s request for a quote is sent to the insurance company to follow up.
3. Outbound/inbound calls between the insurer and customer.
Is EverQuote Stock A Buy?
According to analysts, EverQuote is a strong buy.
EVER uses a variable marketing margin (VMM) or revenue minus the cost of advertising to determine the effectiveness of individual ads to manage returns on advertising. The margin for EVER’s VMM was $31.4 million in the first quarter of this year, a leap of 32%, year-over-year.
At this time, EVER’s goal is to increase traffic to its marketplace online to boost monetization. Statistics show that digital insurance carriers surpassed year-over-year spending on EverQuote’s site by over 200% during the company’s first quarter.
From the analyst’s standpoint and 2021 Q1 results, EverQuote’s bidding feature makes it a go-to insurance platform for major insurance companies seeking to attract customers. EVER, at this time, remains in the top spot to realize more traffic as insurance shopping continues to shift online.
EverQuote Revenue and Earnings Forecast
EverQuote is expecting revenues of around $102 million in its second quarter of 2021, an increase of 30% year-over-year (YOY)* at midpoint. The VMM is expected to hover between $31 million and $32 million with an adjusted EBITDA** from $5 million to $6 million.
*A YOY calculation compares a stat for one financial period to a stat for the same period the prior year. The period covers a quarter or month. The YOY determines the percentage change for the previous 12 months.
Calculating the YOY enables you to calculate growth for a company more objectively. For example, if your revenue rose 10% last month, but sales usually rise during this month to 20%, your revenue is actually down, showing the business is doing worse, not better. Things are not always what they first appear when you look in-depth at the numbers.
**EBITDA stands for “earnings before interest, taxes, depreciation, and amortization.” This calculator permits financial analysts to make helpful comparisons of businesses and project the long-term profitability of a company, figuring its capacity to meet future financing. Calculating the EBITDA can assist you in determining a company’s valuation.
Basically, calculating the EBITDA allows you to measure the net income of a business, while adding the costs related to interest, expense, taxes depreciation, and amortization back into the figure. This form of figuring profitability arose during the 1980s when leverage buyouts were common. Analysts used the EBITDA calculation as a measure to see if a company could afford the restructuring of a distressed property.
EverQuote expects its VMM to remain fairly consistent, or similar to the first quarter, for the next few quarters before broadening in Q4, influenced by open enrollments for health direct-to-consumer agency increases. In the first quarter of 2021, the VMM represented 30% of the company’s revenue.
The use of multiple online channels by EVER indeed makes it one bullish pick according to analysts. The firm currently holds a 5 to 7x advantage for attracting traffic over the competition.
Risks of Buying EverQuote Stock
Given the above information, you wouldn’t think you would worry much about any risks associated with the stock. However, 2 risks prevail for buying the stock.
- Insider trading has taken place for the past 3 months.
- Shareholders have been diluted in the recent past. Because of the issuance of new stock, the activity has decreased shareholder ownership.
Therefore, keep these 2 factors in mind before you make a buy.
Is EverQuote’s Valuation Fair?
Yes, the stock’s valuation is fair. In this case, the two-phase discounted cash flow (DCF) method is used, which accounts for 2 stages of a company’s growth.
When using this model, DCF pertains to the value of a future dollar, which, in this scenario, is less than today’s dollar. Therefore, the DCF discounts the value of future cash flows to their projected value in current dollars.
Currently, EverQuote is trading under its fair value. According to the stats, the stock is trading significantly below fair value.
Analysts project earnings to grow approximately 65% per year. All this portends a positive future for anyone investing in EverQuote stock.
With shares trading below the stock’s fair value and the projection for an increasingly robust cash flow, a higher share value is seen in the analysts’ crystal ball.
Is EverQuote Stock a Buy? The Bottom Line
If you are still asking, Ïs EverQuote a good investment?” ask no more, as the stock is in the buy zone.
Read further to see why investors can benefit from buying EVER shares.
Why Is EverQuote Stock a Buy?
EverQuote, from all indicators, is a strong buy, especially when you answer the following questions regarding risk.
Do analysts forecast profitability for EverQuote?
Yes, over the upcoming 3 years.
Negative shareholders’ equity?
Meaningful market capitalization?
Yes – $922 million
Revenue and earnings growth?
Yes – At 64.5% over 3 years
Cash to cover 1 year’s operations
Dividends are not paid on EVER
Stable share price?
Yes, for the past 3 months the share price has been stable.
Yes, substantial analyst reviews
Meaningful levels of revenue?
Given the current data and EVER’s movement in the stock market, you want to take this small cap stock off your Watchlist and add it to your Buy List now.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.