Essent Group (ESNT) AI Stock Analysis

• Market Cap: $6.12B
• Dividend Yield: 1.89%
• Average Volume (3M): 745.05K
• Price to Earnings (P/E): 9.1
• Beta (1Y): 0.65
• Revenue Growth: 4.79%
• EPS Growth: -0.76%
• Country: US
• Employees: 555
• Sector: Financial
• Sector Strength: 69
• Industry: Insurance - Specialty
• EPS (TTM): 1.93
• Shares Outstanding: 98,533,760
• 10 Day Avg. Volume: 645,430
• 30 Day Avg. Volume: 745,052
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): N/A
• P/FCF Ratio: N/A
• Enterprise Value/Market Cap: 1.08
• Enterprise Value/Revenue: 6.54
• Enterprise Value/Gross Profit: 6.71
• Enterprise Value/Ebitda: 7.48
• 1Y Price Target: $66.83
• Price Target Upside: 4.59% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 6

• Rating: 81 Outperform
• Price Target: $71.00 ▲(11.11% Upside)

Essent Group's strong technical indicators and solid financial performance are the primary drivers of its stock score. While valuation metrics suggest the stock is undervalued, concerns from the earnings call about declining net income and rising defaults slightly temper the overall outlook.

Positive Factors

Capital Return

Essent Group has repurchased 6.8M shares for $387M, indicating strong capital return.

Earnings

The 2Q EPS of $1.93 was ahead of BofAe/consensus at $1.62/$1.70, driven by better credit, OpEx, and stronger top-line results.

Negative Factors

Credit Provisions

Credit provisions at $31M were higher than the forecast as lower prior period reserve releases and slightly higher in-period losses contributed to the miss.

Market Share

New insurance written of $12.5B came in below estimates, resulting in a loss of 170bps of market share quarter over quarter.

Essent Group Business Overview & Revenue Model

Company Description

Essent Group Ltd. is a leading provider of private mortgage insurance (PMI) and related services in the United States. Founded in 2008 and headquartered in Hamilton, Bermuda, Essent operates primarily in the financial services sector, focusing on mitigating risk for lenders and facilitating homeownership for borrowers. The company's core products include mortgage insurance, which protects lenders against borrower default, as well as reinsurance and other risk management solutions.

How the Company Makes Money

Essent generates revenue primarily through the sale of private mortgage insurance policies. When lenders issue loans, they often require PMI to protect against the risk of borrower default. Essent charges premiums for these insurance policies, which can be paid upfront or monthly. The company also earns income through reinsurance arrangements, where it shares risk with other insurers, and from investment income generated on the premiums it collects before claims are paid out. Significant partnerships with mortgage lenders and servicers enhance its market reach and contribute to its earnings by providing a steady stream of premium income. Additionally, the overall health of the housing market and interest rates can impact the volume of mortgage originations, thereby affecting Essent's revenue.

Essent Group Financial Statement Overview

Summary

Essent Group presents a solid financial position with strong profitability, efficient cash flow management, and prudent leverage. While revenue growth is steady, attention should be given to the declining EBIT and EBITDA margins, which could impact future profitability.

Income Statement

Essent Group demonstrates strong profitability with high gross and net profit margins, indicating efficient operations and cost management. The TTM data shows a slight revenue growth, suggesting stability in revenue generation. However, the declining EBIT and EBITDA margins over the years could indicate rising operational costs or competitive pressures.

Balance Sheet

The company maintains a low debt-to-equity ratio, reflecting prudent financial leverage and a strong equity base. Return on equity is healthy, indicating effective use of shareholder funds to generate profits. However, the equity ratio shows a slight decline, suggesting an increase in liabilities relative to assets.

Cash Flow

Essent Group exhibits strong cash flow management with consistent free cash flow growth and a high free cash flow to net income ratio, indicating efficient conversion of profits into cash. The operating cash flow to net income ratio is robust, although it shows some fluctuations, which could suggest variability in cash flow generation relative to earnings.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	1.01B	1.27B	1.13B	1.02B	1.03B	955.15M
Gross Profit	988.46M	1.27B	1.13B	1.02B	1.03B	955.15M
EBITDA	886.24M	896.59M	857.66M	1.01B	833.98M	502.50M
Net Income	714.85M	729.40M	696.39M	831.35M	681.78M	413.04M
Balance Sheet
Total Assets	7.22B	7.11B	6.43B	5.72B	5.72B	5.20B
Cash, Cash Equivalents and Short-Term Investments	6.06B	131.48M	141.79M	4.82B	5.04B	4.67B
Total Debt	494.63M	493.96M	421.92M	420.86M	419.82M	321.72M
Total Liabilities	1.55B	1.51B	1.32B	1.26B	1.49B	1.34B
Stockholders Equity	5.67B	5.60B	5.10B	4.46B	4.24B	3.86B
Cash Flow
Free Cash Flow	854.82M	854.77M	759.00M	584.84M	706.76M	725.49M
Operating Cash Flow	867.01M	861.53M	763.00M	588.82M	709.26M	727.93M
Investing Cash Flow	-500.23M	-706.93M	-525.57M	-398.87M	-583.17M	-1.15B
Financing Cash Flow	-472.07M	-164.91M	-176.88M	-190.20M	-147.43M	457.97M

Essent Group Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 63.90
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ESNT, the sentiment is Positive. The current price of 63.9 is above the 20-day moving average (MA) of 59.33, above the 50-day MA of 58.89, and above the 200-day MA of 56.70, indicating a bullish trend. The MACD of 1.32 indicates Negative momentum. The RSI at 64.18 is Neutral, neither overbought nor oversold. The STOCH value of 82.30 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for ESNT.

Essent Group Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ACT	84 Outperform	$5.57B	8.57	13.47%	2.04%	3.15%	5.70%
NMIH	83 Outperform	$3.04B	8.34	16.91%	―	9.99%	11.47%
ESNT	81 Outperform	$6.12B	9.05	12.94%	1.89%	4.79%	-0.76%
RDN	78 Outperform	$4.73B	8.78	13.07%	2.82%	0.24%	3.14%
MTG	75 Outperform	$6.35B	9.03	14.85%	1.96%	3.26%	12.70%
Sector *	68 Neutral	$17.56B	11.61	10.34%	3.76%	9.69%	0.41%
FAF	65 Neutral	$6.60B	35.83	3.80%	3.25%	14.28%	-2.87%

Essent Group Corporate Events

Essent Group Adopts New Financial Reporting Standards

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.