Essent Group (ESNT) AI Stock Analysis

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Essent Group

(NYSE:ESNT)

79Outperform

Essent Group demonstrates strong financial health with robust profitability and a healthy balance sheet. Technical indicators show positive momentum, and the valuation suggests potential undervaluation. The earnings call highlights both strengths and challenges, with a solid capital position but some operational concerns. Overall, the stock is attractive with some areas to watch for potential risks.

Essent Group (ESNT) vs. S&P 500 (SPY)

Market Cap

$5.60B

Dividend Yield2.12%

Average Volume (3M)878.22K

Price to Earnings (P/E)7.9

Beta (1Y)0.63

Revenue Growth11.88%

EPS Growth5.54%

CountryUS

Employees625

SectorFinancial

Sector Strength86

IndustryInsurance - Specialty

Share Statistics

EPS (TTM)6.84

Shares Outstanding103,353,030

10 Day Avg. Volume900,012

30 Day Avg. Volume878,221

Financial Highlights & Ratios

PEG Ratio1.43

Price to Book (P/B)N/A

Price to Sales (P/S)4.64

Price to Cash Flow (P/CF)6.40

P/FCF Ratio6.40

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$64.00

Price Target Upside16.51% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering5

Essent Group Business Overview & Revenue Model

Company DescriptionEssent Group Ltd., through its subsidiaries, provides private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. Its mortgage insurance products include primary, pool, and master policy. The company also provides information technology maintenance and development services; customer support-related services; underwriting consulting; and contract underwriting services. It serves the originators of residential mortgage loans, such as regulated depository institutions, mortgage banks, credit unions, and other lenders. The company was founded in 2008 and is based in Hamilton, Bermuda.

How the Company Makes MoneyEssent Group makes money primarily through the premiums it charges for providing private mortgage insurance to lenders. The company earns revenue from both primary mortgage insurance policies and reinsurance agreements. In primary mortgage insurance, Essent receives premium payments from lenders in exchange for insuring the risk of default on a portion of the loan value, typically covering the top 20% to 30% of the loan. Revenue is also generated from investment income, as the company invests the collected premiums into a diversified portfolio to earn additional income. Key factors contributing to its earnings include the volume of new insurance written, the persistency of existing policies, and the overall credit performance of its insured portfolio. Essent may also engage in strategic partnerships with financial institutions to expand its market reach.

Essent Group Financial Statement Overview

Summary

Essent Group presents a solid financial profile characterized by strong profitability, a robust balance sheet, and effective cash flow management. The company is on a positive growth trajectory with a strong revenue increase, but certain areas like operational efficiency metrics and free cash flow consistency could be improved to enhance overall stability.

Income Statement

Very Positive

Essent Group shows strong profitability with a consistent increase in net income over the years. The revenue growth rate from 2023 to 2024 was approximately 14.55%, indicating a positive growth trajectory. The net profit margin is robust due to high net income relative to total revenue. However, absence of EBIT and EBITDA in 2024 data limits a complete analysis of operational efficiency.

Balance Sheet

Positive

The company maintains a healthy balance sheet with high stockholders' equity and zero debt as of 2024, minimizing financial risk. The debt-to-equity ratio is favorable, being zero in recent years. However, the equity ratio has slightly decreased over time, which might suggest increased liabilities relative to assets.

Cash Flow

Positive

Essent Group demonstrates strong cash flow generation with consistent free cash flow growth. The operating cash flow to net income ratio is solid, indicating efficient conversion of net income into cash. However, the growth rate of free cash flow shows some fluctuations, which could be a point of concern.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
1.24B	1.09B	972.15M	972.12M	955.15M
	Gross Profit
1.24B	890.30M	800.41M	805.27M	800.46M
	EBIT
0.00	970.21M	1.02B	811.92M	480.29M
	EBITDA
0.00	857.66M	1.01B	833.98M	502.50M
	Net Income Common Stockholders
729.40M	696.39M	831.35M	681.78M	413.04M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
131.48M	141.79M	4.82B	5.04B	4.67B
	Total Assets
7.11B	6.43B	5.72B	5.72B	5.20B
	Total Debt
493.96M	421.92M	420.86M	419.82M	321.72M
	Net Debt
-131.48M	280.13M	339.62M	338.33M	218.89M
	Total Liabilities
1.51B	1.32B	1.26B	1.49B	1.34B
	Stockholders Equity
5.60B	5.10B	4.46B	4.24B	3.86B
Cash Flow		Free Cash Flow
854.77M	759.00M	584.84M	706.76M	725.49M
	Operating Cash Flow
861.53M	763.00M	588.82M	709.26M	727.93M
	Investing Cash Flow
-706.93M	-525.57M	-398.87M	-583.17M	-1.15B
	Financing Cash Flow
-164.91M	-176.88M	-190.20M	-147.43M	457.97M

Essent Group Technical Analysis

Technical Analysis Sentiment

Negative

Last Price54.93

Price Trends

50DMA

56.26

Negative

100DMA

55.91

Negative

200DMA

57.98

Negative

Market Momentum

MACD

0.49

Negative

RSI

61.76

Neutral

STOCH

71.23

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ESNT, the sentiment is Negative. The current price of 54.93 is below the 20-day moving average (MA) of 56.04, below the 50-day MA of 56.26, and below the 200-day MA of 57.98, indicating a bearish trend. The MACD of 0.49 indicates Negative momentum. The RSI at 61.76 is Neutral, neither overbought nor oversold. The STOCH value of 71.23 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ESNT.

Essent Group Risk Analysis

Essent Group disclosed 51 risk factors in its most recent earnings report. Essent Group reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Essent Group Peers Comparison

Overall Rating

UnderperformOutperform

Sector (64)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ACT	83 Outperform	$5.27B	7.98	14.29%	2.12%	4.17%	6.47%
ESNT	79 Outperform	$5.60B	7.92	13.63%	2.12%	11.88%	5.54%
MTG	77 Outperform	$5.63B	8.03	14.90%	2.17%	4.56%	15.94%
RDN	77 Outperform	$4.56B	8.24	13.40%	3.06%	3.79%	3.86%
NMIH	75 Outperform	$2.60B	7.66	17.38%	―	12.43%	15.32%
FAF	68 Neutral	$6.18B	47.72	2.69%	3.58%	-2.03%	-39.52%
Sector *	64 Neutral	$13.21B	9.26	9.39%	4.87%	16.14%	-8.87%

* Financial Sector Average

Performance Comparison

ESNT

Essent Group

54.93

2.71

5.19%

FAF

First American Financial

59.46

5.26

9.70%

MTG

MGIC Investment

23.94

4.78

24.95%

RDN

Radian Group

32.40

3.47

11.99%

NMIH

NMI Holdings

33.94

4.30

14.51%

ACT

Enact Holdings

35.37

6.59

22.90%

Essent Group Earnings Call Summary

Earnings Call Date: Feb 14, 2025 | % Change Since: -4.60% | Next Earnings Date: May 2, 2025

Earnings Call Sentiment Neutral

The earnings call reflects a mixed sentiment. While there are positive aspects such as increased book value, strong persistency, investment income, and successful reinsurance transactions, the decrease in net income, impact of natural disasters on defaults, and losses in title operations present notable challenges.

Highlights

Increased Book Value Per Share

Essent Group's book value per share increased by 11% from a year ago, reaching $53.36 as of December 31, 2024.

Strong Persistency and Investment Income

Despite a slight decrease in persistency from last quarter, Essent Group maintained a high persistency rate of 86% and saw a 20% increase in net investment income.

Improved Capital Position

Essent Group announced a new $500 million share repurchase authorization and an 11% increase in the quarterly dividend to $0.31 per share, indicating strong financial health.

Successful Reinsurance Transactions

The company entered into two quota share transactions to provide forward protection for 2025 and 2026 business, with approximately 97% of the portfolio covered by reinsurance.

Lowlights

Decrease in Net Income

Essent Group reported a net income of $168 million for the fourth quarter of 2024, which is a decrease from $175 million a year ago.

Impact of Hurricanes on Defaults

Credit performance in the fourth quarter was impacted by approximately 2,000 defaults in areas affected by Hurricanes Helene and Milton. This increased the provision for losses to $37.2 million, up from $19 million a year ago.

Title Operations Loss

Essent Group's title operations incurred a pre-tax loss of approximately $21 million in the prior year, and the company does not expect any material impact on earnings from this segment in the near term.

Company Guidance

During Essent Group Limited's fourth-quarter earnings call for fiscal year 2024, several key metrics and guidance were provided. The company reported a net income of $168 million for the quarter, with a diluted earnings per share of $1.58. For the full year, net income was $729 million, translating to $6.85 per diluted share, and the return on average equity stood at 14%. As of December 31, 2024, the book value per share was $53.36, an 11% increase from the previous year. Mortgage insurance in force reached $244 billion, reflecting a 2% year-over-year increase. The persistency rate was 86%, with strong credit quality indicated by a weighted average FICO score of 746 and an LTV of 93%. The company highlighted a competitive mortgage industry landscape with a combined ratio target of 35% to 45% for new business. Essent also increased its quarterly dividend by 11% to $0.31 per share and authorized a $500 million share repurchase program through 2026. The PMIERs sufficiency ratio was a robust 178%, with $1.6 billion in excess available assets, indicating a strong capital position.

Essent Group Corporate Events

Financial DisclosuresRegulatory Filings and Compliance

Essent Group Adopts New Financial Reporting Standards

Neutral

Mar 27, 2025

In November 2023, the Financial Accounting Standards Board issued an update requiring public entities to disclose significant expenses of their reportable segments. Essent Group adopted this standard on a retrospective basis, disclosing annual segment information in its 2024 Form 10-K. The company will continue to provide quarterly and year-to-date segment information in its future filings. This change aims to improve transparency in financial reporting, impacting how Essent Group presents its financial performance to stakeholders.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.