Shares of Atlas Financial Holdings, Inc. (AFH) hit a new 52-week high at $14.85 on Jan 2, 2014.
The momentum in this Zacks Rank #2 (Buy) stock was driven by improved operating conditions which has enabled the company to clock in accelerating gains in underwriting profit, lower combined ratio and sizeable increases in gross premiums written and net premiums earned.
Atlas Financial is witnessing operating synergies owing to its well-managed vertical expansion throughout its geographic base, established over the past two years. The company’s acquisition of Gateway, in early 2013, has also contributed to top-line growth.
A strong operating performance in 2013 has led to a more than two-fold increase in share price over the past one year.
We expect the company’s 2014 earnings to gain from insurance price strengthening and increasing business. It is also worth noting that Atlas Financial is not materially exposed to catastrophic risk which eliminates potential earnings volatility.
Atlas Financial is scheduled to release its fourth-quarter 2013 results on Feb 6, 2014. The Zacks Consensus Estimate for the fourth quarter is pegged at 21 cents per share, in line with year-ago earnings.
However, valuation looks a bit stretched for Atlas Financial at this point. The shares are trading at about 12% premium to the industry average on a forward price-to-earnings basis and about 38% premium on a price-to-book basis. While return on equity is 7.5% higher than the industry average, return on assets was 2.5 times of the industry average.
Other Stocks to Consider
Other players in the property and casualty insurance space, which look attractive at current levels, are Allied World Assurance Co. (AWH), Cincinnati Financial Corp. (CINF) and Fidelity National Financial, Inc. (FNF). All these stocks carry a Zacks Rank #1(Strong Buy).
Read the Full Research Report on CINF
Read the Full Research Report on FNF
Read the Full Research Report on AWH
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