Anyone worried about the decline in the number of U.S.-listed stocks-- they fell from 7,000 in 1996 to less than 4,000 in 2020--ought to take a chill pill. There are plenty of public companies to invest in that many investors haven’t heard about. 

Porch Group (PRCH) is one such example. 

The Seattle-based company uses data to improve the homeownership experience, whether selling customers homeowners insurance, providing consumer services such as moving and home management services, or providing software to industry participants.

Founded in 2012 with a home services marketplace platform bringing homeowners together with home repair and renovation experts to get projects around the home completed, it went public in December 2020 by merging with a SPAC (special purpose acquisition company), PropTech Acquisition Corp.

Most SPACs go public at $10 a share. Yesterday’s 68% jump put it over the $10 mark for the first time since January 2022. 

Porch Group’s stock jumped after it reported excellent Q1 2025 results Tuesday after the close. Aggressive investors jumped on Porch Group’s unusual options activity yesterday. 

Here’s why that’s a brilliant idea.      

The Pathway to Profitability

The company’s quarterly results were the first under its new business model, which was announced in December 2024 at its annual Investor Day presentation.

To understand the changes in its business model, one should go back to April 2021, when Porch paid $100 million for Homeowners of America (HOA), an MGA (Managing General Agent) operating in six states and licensed in 31, including Texas, where it is based. 

“Combining Porch’s vast access to homebuyers and unique property data with HOA’s strong pricing and claims experience, Porch believes it can become one of the largest InsurTech companies with significant advantages to driving rapid, long-term growth,” Porch’s April 2021 press release stated. 

CEO and founder Matt Ehrlichman said that HOA would provide Porch with “rapid, scalable, and profitable growth.”

At the time, it had approximately $270 million in pro forma gross written premiums (GWP) with the addition of HOA. In 2024, it was $452 million. Its 2025 and 2026 targets are $500 million and $600 million, respectively. Long-term, Porch’s GWP goal is $3 billion by 2036. 

The problem with Porch’s business, as far as I can tell, was that it had excessive claims risk on its books relative to its profitability. It needed to offload that risk while using data to grow its GWP and increase its commissions and fees.  

So, in March 2023, it applied to the Texas Department of Insurance to form a Texas insurance reciprocal exchange, which would own the insurance policies, and Porch would manage the reciprocal exchange. 

That application to create PIRE (Porch Insurance Reciprocal Exchange) was approved in October 2024 and officially opened for business on Jan. 7. As part of PIRE’s creation, it sold HOA to PIRE for $105 million, the value of its 2024 expected surplus (assets minus liabilities).     

The Results Speak for Themselves

The margins tell the story of the first quarter. As expected, the change in business model--kind of an asset-light move--resulted in significantly higher margins. 

In Q1 2025, its gross margin excluding PIRE was 82%, 23 percentage points higher than Q1 2024. Including PIRE, it was 62%, 30 percentage points higher.   

As a result, it led to an $8.4 million net profit (excluding PIRE), 6x higher than a year ago. Including PIRE, it earned $3.4 million, 128% higher than a $13.4 million loss in Q1 2024. 

In 2025, it expects gross profits of $327.5 million at the midpoint of its guidance, from $410 million in revenue, an 80% gross margin. That’s expected to lead to adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $65 million, nearly 4x higher than 2024. 

Ehrlichman said about PIRE:

“The Reciprocal remains healthier than it has ever been and successfully placed its new reinsurance program at a lower cost, reducing its risk and marking the moment Porch Shareholders are no longer in the catastrophic weather claims business, while still participating in the attractive growth of the homeowners insurance industry, with durable competitive advantages.”

What’s not to like?

The obvious answer, especially if you’re a value investor, is its valuation. Based on its 2025 adjusted EBITDA estimate of $65 million, the $1.09 billion market cap is 16.8x this estimate.  

Arguably the best property and casualty insurer in the U.S., you can buy Progressive (PGR) for 15x its $11.57 billion EBITDA.

If you’re a risk-averse investor, I don’t think there’s any question about which stock to buy. However, if you’re risk-tolerant, Porch is attractive.

The Unusually Active Options Speak Volumes

Porch’s 30-day average options volume is 2,172. Yesterday, it was 25,208, 12x the average. That’s the highest volume in a single day in the past 24 months. 

The Put/Call volume ratio yesterday was 0.21, which is very bullish, while the Put/Call open interest was 0.45. Today, that’s up slightly, to 0.50, which is also bullish. The last time it was over 1.0 was Feb. 20. 

Yesterday, it had three unusually active options--defined as options expiring in seven days or more with Vol/OI ratios of 1.24 or higher--with Vol/OI ratios ranging from 3.18 to 22.34, all calls. 

As I write this on Thursday, about an hour into trading, Porch shares are up 13% to $11.20. Based on the numbers from yesterday's close, I’d be more inclined to consider one of the two expiring in August rather than the $10 strike expiring next Friday. 

Only the $12.50 strike has volume in today’s trading, so that’s the one I’d go with. It has a current ask price of $2.00 (16% of strike) with seven call contracts traded. 

The breakeven of $14.50 is 34.88% higher than its current share price of $10.75. The expected move over the next 99 days is 36.77%, which means you’ve got a 30.31% profit probability, which isn’t terrible for a $200 bet.