Driven by strong fundamentals and good growth prospects, Essent Group Ltd. ESNT looks like an attractive investment option right now. Moreover, its earnings estimates have been increasing lately, indicating analysts’ optimism regarding the company’s growth prospects.
The company’s Zacks Consensus Estimate for earnings in 2018 has been revised nearly 1.5% upward over the past 60 days. Thus, the stock currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company’s price performance does not seem very impressive. Its shares lost 5.1% in the last six months compared with the industry’s decline of 10.5%. Nevertheless, given the upward estimate revisions and a solid Zacks Rank, the stock is expected to gain in the future.
Mentioned below are some factors that make Essent Group an attractive pick right now.
Earnings per Share Growth: In the last three-five years, Essent Group witnessed earnings per share (EPS) growth of 35.1%, higher than the industry average of 12.7%. The uptrend is likely to continue in the near term, which can be seen from the projected earnings growth rate of 48.7% and 10.6% for 2018 and 2019, respectively.
The company’s long-term (three-five years) estimated EPS growth rate of 10% promises reward for shareholders.
Strong Leverage: Essent Group’s debt/equity ratio, which stands at 0.00, indicates that the company uses no debt to finance its operations. On the other hand, the industry’s debt/equity ratio stands at 0.74. This reflects the company’s financial stability, even in adverse economic conditions.
Superior Return on Equity (ROE): Essent Group has an ROE of 20.18% compared with the industry average of 6.88%. This indicates that the company reinvests its cash more efficiently compared with its peers.
Valuation Looks Reasonable: Essent Group stock looks undervalued right now, with respect to its price-to-earnings (P/E) and PEG ratios. It has a P/E (F1) ratio of 7.4, lower than the industry average of 8.6. Moreover, the company’s PEG ratio of 0.7 is below the industry average of 1.0.
Further, Essent Group has a Value Score of B. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Other Stocks Worth a Look
Some other top-ranked stocks from the finance space are On Deck Capital, Inc. ONDK, Ally Financial Inc. ALLY and Credit Acceptance Corporation CACC.
On Deck Capital currently sports a Zacks Rank #1. Over the past 60 days, it has witnessed an upward earnings estimate revision of 22.7% for 2018. Additionally, the stock has gained 26.6% in the past two years.
Over the past 60 days, Ally Financial’s earnings estimates for 2018 have been revised 1.3% upward. The company’s shares have increased 17.9% in the past two years. The stock currently sports a Zacks Rank #1.
Credit Acceptance’s earnings estimates for 2018 have remained stable over the past 60 days. Its shares have surged 76.5% in the past two years. The stock currently has a Zacks Rank of 2.
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