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Should Value Investors Buy Essent Group (ESNT) Stock?

Zacks Equity Research

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

Essent Group (ESNT) is a stock many investors are watching right now. ESNT is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A.

We also note that ESNT holds a PEG ratio of 0.84. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ESNT's industry currently sports an average PEG of 0.94. ESNT's PEG has been as high as 0.93 and as low as 0.61, with a median of 0.84, all within the past year.

Another notable valuation metric for ESNT is its P/B ratio of 1.83. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. ESNT's current P/B looks attractive when compared to its industry's average P/B of 1.84. Over the past year, ESNT's P/B has been as high as 2.11 and as low as 1.38, with a median of 1.81.

Finally, our model also underscores that ESNT has a P/CF ratio of 8.76. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. ESNT's current P/CF looks attractive when compared to its industry's average P/CF of 12.12. ESNT's P/CF has been as high as 9.69 and as low as 5.90, with a median of 8.76, all within the past year.

Value investors will likely look at more than just these metrics, but the above data helps show that Essent Group is likely undervalued currently. And when considering the strength of its earnings outlook, ESNT sticks out at as one of the market's strongest value stocks.


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