Hi, I just bought 500 shares of ITIC at 26 7/8. This stock has shown pretty consistent stock price growth over the last ~3 years of something like 60% per year. EPS growth has been less than this, about 18% per year, resulting in a doubling of the P/E from 8-9 (in late '95 & early 96) to about 17 now. A lot of small bank stocks have been showing stock price growth much higher than EPS growth also, but some of these stocks have P/E's higher than ITIC (20-25 range) and EPS growth rates that are lower (~11%). Hence, baring a market meltdown, I see no reason why ITIC can't reach a P/E equivalent to the S&P 500 (24-25) in the next 12-18 months, which would imply a price around 50.
ITIC runs quite far behind their primary competitors in size and revenues- Old Republic (ORI), First American (FAF), Chicago Title (CTZ), Stewart (STC), Fidelity (FNF) and LandAmerica (LFG.) To paraphrase a recent movie advertisement, in this industry size matters. ITIC is strong in North Carolina and has shown a nice rate of growth over the past few years. Being small and nimble does have its advantages when you are fighting the gorillas mentioned above. On the downside, you don't have the depth of assets for protection against possible claims.
I look at it this way. ITIC largely insures residential titles. New business, and hence, growth, is fueled by home sales. This is in turn driven by low interest rates. My guess is that they'll continue to do well until late summer when the housing market typically dies down, and the interest rate cycle starts to kick rates back up again. That might get this stock up to $35 to $40 max. It's not a technology stock (thank god).
I use a computer search tool to find companies with very consistently rising earnings.
After finding 10 or 15 companies of this sort I evaluate them by hand. ITIC is the only insurance company on the list. There are quite a few banks, some manuafacturers, a restaurant, an oil services company etc. It seemed to me that ITIC, being financial, was more similar to banks than the other companies. Two of the bank stocks had EPS growth almost identical to ITIC and similar P/E so I bought those too.
I expect the previously existing trend of rising stock price with all three to continue at exactly the same rate for at least another year. I have no idea whether my analysis actually "works". So I buy the stocks and see what happens. Time will tell.