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Why Is AMERISAFE (AMSF) Down 6.6% Since Its Last Earnings Report?

Zacks Equity Research
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A month has gone by since the last earnings report for AMERISAFE, Inc. AMSF. Shares have lost about 6.6% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is AMSF due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Amerisafe's Q4 Earnings Miss as Revenues Decline

Amerisafe Inc. reported fourth-quarter 2017 operating earnings per share of 69 cents, missing the Zacks Consensus Estimate by 16.9%. Also, earnings slumped 33.7% year over year due to a decline in revenues.

Quarter in Detail

Amerisafe’s total operating revenues decreased 3.7% from the prior-year quarter to $94.9 million, but surpassed the Zacks Consensus Estimate by 2.3%.

Gross written premiums in the quarter were up 0.6% to $81.1 million, primarily due to an increase in payroll audits and related premium adjustments, partly offset by declines in voluntary premiums.

Net investment income decreased 6.9% year over year to $7.3 million. This was mainly due to an increase in the value of an investment in a limited partnership hedge fund in the year-ago quarter.

Total expenses came in at $77.14 million, 9% higher than the year-ago quarter led by increased loss and loss adjustments incurred, and underwriting and other operating costs.

Net combined ratio, a measure of profitability (lower the better) was 88.3%, deteriorating 1150 basis points (bps) year over year.

The company incurred a one-time non-cash charge of $12.6 million in the fourth quarter, on account of estimated impact of revaluation of its net deferred tax assets pursuant to the Tax Reform Act enacted in December.

Financial Update

Amerisafe exited the quarter with cash and cash equivalents of $55.56 million, down 5.7% year over year.

As of Dec 31, 2017, total shareholders’ equity was $425.4 million, down 6.7% from the year-ago quarter.

Operating return on equity was 11.4%, down 530 bps year over year.

Book value per share as of Dec 31, 2017 was $22.10, down 6.8% from the prior-year quarter.

Dividend Hike, Share Repurchase Nil

On Feb 22, 2018, the company increased its regular quarterly dividend by 10% to 22 cents per share. This increased dividend is payable on Mar 23, 2018 to shareholders of record as of Mar 9, 2018.

During the quarter, no shares were repurchased under the company’s share repurchase plan.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.

AMERISAFE, Inc. Price and Consensus

 

AMERISAFE, Inc. Price and Consensus | AMERISAFE, Inc. Quote

VGM Scores

At this time, AMSF has a subpar Growth Score of D a grade with the same score on the momentum front. The stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise AMSF has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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