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The Cover-More Group Ltd share price could keep travelling higher

Credit: Roger Schultz

It has been a rollercoaster of a week for shareholders of travel insurer Cover-More Group Ltd (ASX: CVO). Just yesterday the share price dropped by 8.5%, but today it has more than made up for those losses and is currently trading up by over 17%.

Yesterday’s losses came on the back of a broker downgrade from Morgan Stanley and a lukewarm response to the previous day’s trading update. That update revealed the company’s third quarter revenue rose by 4.7%, compared to the 6.6% rise it had delivered in the first two quarters.

Although it is great to see revenue rising still, it appears the slowing growth worried some shareholders who headed to the exits.

On a brighter note, the update also contained news of an agreement with Flight Centre Travel Group Ltd (ASX: FLT) to provide travel insurance through nine of its brands in the United States. But that still wasn’t enough to stop the share price dropping.

But today is a very different story. The company is presenting at an investor conference hosted by Macquarie Group Ltd (ASX: MQG) today, and so released its presentation material to the market beforehand.

In the presentation the company shows that it has incredible growth prospects ahead of it and a good portion of that will come from the United States. Thanks to the agreement with Flight Centre, the company expects it to contribute sales of $30 million in the first 12 months of the agreement.

Better yet is the fact that it sees $80 million of pipeline opportunities in the US market. For the last full year total company-wide sales were $220 million, so you can see what a boost this agreement brings.

Additionally, growth in China and India looks like it could be explosive. Management has indicated its expectation that operations in both countries will enjoy strong double-digit growth for the full year. Looking ahead to next year I would expect the same and perhaps even an acceleration in growth.

The company is expecting to name a new CEO for SE Asia imminently with expectations of broadening distribution across Singapore, Malaysia and Indonesia. If it can make a success of things in these key markets as well, then I would expect Cover-More to be more than able to live up to market expectations of over 11% per annum earnings growth for the next couple of years.

The company does appear to have a lot going for it at the moment and I believe it is worth considering for an investment. The shares are still down by over 35% in 2016, so there could yet be significant upside ahead for investors despite today’s big gains.

But if this isn’t an investment for you, then I believe these three shares might be more your cup of tea. That’s if you like big dividends and potential share price gains. I know I do!

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Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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