Cautious Hold Rating for Definity Financial Corp. Amid Performance Challenges and Fair Valuation

Definity Financial Corp. (DFY – Research Report), the Financial sector company, was revisited by a Wall Street analyst on May 9. Analyst Tom Mackinnon from BMO Capital maintained a Hold rating on the stock and has a C$64.00 price target.

Tom Mackinnon has given his Hold rating due to a combination of factors impacting Definity Financial Corp.’s performance. The company’s recent earnings per share fell short of expectations, primarily due to weaker distribution and underwriting income, as well as a slight decline in net investment income. Despite these setbacks, the company’s full-year guidance remains unchanged, indicating that the issues may be temporary or seasonal.
Additionally, while the company’s valuation appears to reflect its projected return on equity and potential capital deployment benefits, the current price-to-book ratio suggests that the stock is fairly valued at present. The underlying loss ratio has also increased slightly, driven by higher weather-related claims, which may pose risks to future profitability. Overall, Mackinnon believes that while Definity Financial Corp. has growth potential, the current valuation and recent performance warrant a more cautious Hold rating.

In another report released on April 25, CIBC also maintained a Hold rating on the stock with a C$70.00 price target.