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Fortegra Financial (FRF) Showing Signs of a Second-Half Resurgence

FRF is popping to start July, meaning the Street might finally be starting to realize Fortegra's real potential


Editor’s note: This column is the latest update in our 10 Best Stocks for 2014 contest. Hilary Kramer’s pick for the contest is Fortegra Financial (FRF).

best-stocks-2014I named Fortegra Financial (FRF) as my pick in the 10 Best Stocks for 2014 contest back in December, and now that we’re into the second half the year, I wanted to give you a little update on how the company has been doing.

FRF stock had a bit of a rough start to the year, with shares dipping into the $6 range twice (down from the $8-plus levels it enjoyed at the start of the year) but regained some ground in the second quarter after reporting very strong first-quarter earnings.

And I still like the company’s potential.

Management has reiterated its earlier projections of 7% to 9% revenue growth and 32% to 34% EBITDA margins for 2014, which would work out to cash earnings of 86 to 90 cents per share. These are solid numbers that tell me that FRF’s growth story is still well intact.

Fortegra’s underperformance on little company news tells me the stock’s value is not fully recognized by the market. However, Fortegra is in the process of business restructuring, as it has sold off its insurance brokerage firm, which could unlock some major value for the Street to eventually realize and acknowledge.

FRF stock has popped 12% in the past five days alone, and with six months still left in 2014, FRF has plenty of room to keep growing. Management has done a good job in cutting costs in recent quarters. They are using Fortegra’s considerable free cash flow to reduce debt for now, but look for the possibility of another payment protection acquisition as FRF’s recently enhanced credit line has given it the opportunity to make a move that will have some impact on share prices.

FRF remains an attractive bargain buy, and while it might require some patience, I see its renewed upward path continuing in the second half of the year.

Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10 and High Octane Trader.

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