SelectQuote, Inc.

SelectQuote, Inc. (NYSE: SLQT) is a Direct-to-Consumer (DTC) distribution platform that allows customers to purchase health, life, auto, and home insurance plans online. The company earns money by selling insurance products on behalf of its insurance carrier partners in exchange for a commission. It operates in SelectQuote Senior, SelectQuote Life, and SelectQuote Auto & Home segments.

Why Should Investors Exit?

• Topline and bottom line Stress: Due to a series of unforeseen issues in its core Senior segment during the current Medicare Advantage season, the company reported a decrease in total revenues to USD 194.98 million in Q2FY22 (ended December 31, 2021) from USD 357.57 million in Q2FY21. The company reported an increase in net losses to USD 137.01 million in Q2FY22 vs. a net profit of USD 89.86 million in Q2FY21. The company's net margin also fell to 24.0% in Q2FY22 vs. 41.5% in Q1FY22.
• Leveraged Balance Sheet: With a Debt/Equity ratio of 1.44x as of December 31, 2021, compared to the industry norm of 0.25x, the company is exposed to a higher balance sheet risk than its peers. Furthermore, its long-term debt-to-total-capital ratio was 58.4%, compared to the industry median of 5.3% for the same period. These leveraged financials placed the corporation on the verge of enormous swings in response to even minor changes in interest rates.
• High Cash Conversion Days: The company has a long Cash Conversion Cycle (Days) in comparison to the industry, which means it takes more days to convert its inventory to cash. Its Cash Cycle was 117.5 days in Q2FY22, compared to an industry median of 98.6 days.

Stock Recommendation:

SLQT's stock price has remained volatile, declining 73.19% in the past twelve months. The stock is currently trading below 50 and 200 DMA levels, indicating a bearish trend. Considering the fall in topline, bottom line stress, high cash conversion days, leveraged balance sheet risks, and other technical indicators, we recommend a "Sell" rating on the stock at the closing price of USD 6.53 as of February 07, 2022.

Three-Year Technical Price Chart (as of February 07, 2022). Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.