Security National Financial Corporation (NASDAQ: SNFCA) is a small-cap growth company ($126 million market cap) that packs a significant punch. During the past year, Security National has outperformed the S&P 500 by 751 percentage points.
Security National Financial has increased revenues by 54 percent and income by 482 percent in the third quarter of 2012, compared to the same year-ago quarter. There is more growth ahead in 2013, as this holding company commands the right combination of businesses.
Security National Financial Corporation is a holding company. The company operates in three business segments: life insurance, cemetery and mortuary, and mortgage loans.
The mortgage loan segment is an approved government and conventional lender, which originates and underwrites or otherwise purchases residential and commercial loans for new construction, existing homes and real estate projects. The mortgage loan segment accounts for 64.3 percent of revenues in 2012.
The life insurance segment is engaged in the business of selling and servicing selected lines of life insurance, annuity products and accident and health insurance. The life insurance segment accounts for 30.7 percent of revenues in 2012.
The cemetery and mortuary segment of the company consists of five cemeteries in the state of Utah and one cemetery in the state of California, and seven mortuaries in the state of Utah and one mortuary in the state of Arizona. The cemetery and mortuary segment accounts for 5 percent of revenues in 2012.
Security National Financial announced revenues of $63 million for the three months ended September 30, 2012. This represents a 54 percent increase from 2011. Pre-tax earnings from operations for the three-month period increased 634 percent from $835,000 in 2011 to $6.1 million. After-tax earnings increased 482 percent from$770,000 in 2011 to $3.9 million in 2012.
Security National Financial announced revenues of $167 million for the nine months ended September 30, 2012. This represents a 50 percent increase from 2011. Pre-tax earnings from operations for the nine-month period increased from a loss of ($347,000) in 2011 to a gain of $13.4 million in 2012. After-tax earnings increased from $457,000 in 2011 to $9.2 million in 2012.
Net earnings per common share were $0.42 for the three months ended September 30, 2012, compared to $0.08 per share for the prior year. Net earnings per common share were $0.97 for the nine months ended September 30, 2012, compared to $0.05 per share for the prior year.
Security National Financial has accomplished considerable change in its mortgage segment, converting to a retail-dominated distribution model. Without question, low interest rates have materially benefited the mortgage segment, but the percentage of business that is purchased originated, rather than simply refinance, is approximately two times national averages.
From a business segment perspective, the mortgage loan business has increased profits by 418 percent through 9 months 2012 compared to 2011. In comparison, life insurance profits increased 75 percent during this period while the mortuary business had declining profits due to the depreciation charges the segment incurs by virtue of the REO they have undertaken and manage for its sister companies.
On January 3, 2013 Thomson Reuters/Verus upgraded Security National Financial from HOLD to BUY. The stock is up 648 percent in the past year but is only followed by 4 analysts at this time.
Security National Financial Corporation has a 12-month price target of $17.90.
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Greg Pugh, an income-investing expert, publishes a newsletter called Investing for Monthly Income.
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