ESNT reported for 2nd quarter 2017 on Friday, and as Mike (aka foodles) pointed out up-board, the numbers were very impressive. Mr. Market was mildly enthusiastic, as ESNT shares rose a little over 4% to an all-time high.
Here are the details:
Current Price = $40.02
Current 1YPEG = 0.35
Qtr 1st 2nd 3rd 4th
Earnings
2013 .22
2014 .18 .23 .29 .33
2015 .38 .41 .44 .48
2016 .52 .57 .65 .68
2017 .72 .77
YoY Earnings Growth
2014 50%
2015 111% 78% 52% 45%
2016 37% 39% 48% 42%
2017 38% 35%
Revenue (million $)
2013 42
2014 48 54 65 73
2015 80 84 92 97
2016 103 108 121 126
2017 128 138
YoY Revenue Growth
2014 74%
2015 67% 56% 42% 33%
2016 29% 29% 32% 30%
2017 24% 28%
**Metrics: Here are links to articles that explain the metrics I use to evaluate ESNT.**
**These metrics can be used to evaluate insurance companies in general:**
**[http://www.investopedia.com/articles/investing/082813/how-va...](http://www.investopedia.com/articles/investing/082813/how-value-insurance-company.asp#ixzz43mEPQ3jH)**
**[http://seekingalpha.com/article/3280525-how-to-find-a-great-...](http://seekingalpha.com/article/3280525-how-to-find-a-great-insurance-stock)**
Combined Ratio (percent): Lower is better – 30% is just incredible!
2013 74% 59% 54% 57%
2014 54% 49% 43% 42%
2015 39% 38% 38% 38%
2016 37% 34% 34% 33%
2017 34% 30%
Price to Tangible Book Value: Ideally < 2.0
2014 4.58 4.41 4.28 3.68
2015 3.68 3.57 3.42 3.29
2016 3.11 2.95 2.82 2.76
2017 2.64 2.49
Net Premium Growth YoY
2014 110% 83% 76% 68%
2015 68% 56% 39% 32%
2016 26% 29% 32% 31%
2017 25% 26%
Net Income Growth YoY
2015 132% 90% 63% 54%
2016 38% 41% 46% 41%
2017 39% 38%
Float (million $)
2013 106
2014 115 129 147 165
2015 174 190 207 219
2016 228 237 246 248
2017 251 259
Return on Float (Quarter)
2013 1.2%
2014 1.7% 2.4% 2.3% 2.4%
2015 2.5% 2.5% 2.6% 2.5%
2016 2.7% 2.8% 2.8% 3.3%
2017 3.4% 3.6%
Return on Float (TTM): Very good, quite aggressive.
2014 7.5% 8.7%
2015 9.5% 9.6% 9.9% 10.1%
2016 10.3% 10.7% 10.8% 11.6%
2017 12.3% 13.1%
(1-Combined ratio)+return on float:
Well run company is around 10-15%!
2015 72% 72% 72%
2016 73% 77% 77% 79%
2017 78% 83%
Divide by P/B: Greater than market return?
P/BV > 2 maybe justified
2015 20% 21% 22%
2016 23% 26% 27% 28%
2017 30% 34%
Potential Return on Float (TTM): Equities/(fixed income + Cash
Very aggressive and is worth watching.
2014 29.2 26.0
2015 27.2 20.2 29.1 25.2
2016 23.6 22.9 31.5 24.2
2017 28.3 18.4
Return on Equity: Ideally in the mid-teens
2014 9% 10% 9%
2015 11% 12% 13% 14%
2016 14% 15% 16% 17%
2017 17% 17%
Summary
ESNT has put in another very good quarter with impressive growth in earnings, revenue, net premiums and net income. The combined ratio is lowered to 30% so they are getting even more efficient at turning sold premiums into profit. I like that.
They continue to put their float to good use, and are earning excellent returns on their investments. One area I am watching is the ratio of equities to fixed income + cash, which is a measure of how aggressive they are with investments. While this is a good thing up to a point, it could be a problem if they need to get through a crisis. In this latest quarter, they were able to lower this ratio from 28.4 to 18.4 while retaining their excellent return on investments. I like that too.
Overall, I think ESNT has booked another very good quarter. Share price has risen from the mid-thirties to just over $40 during the last quarter, but still sports a 1YPEG of only 0.35 since earnings continue to grow as well. As I noted last quarter, as long as the economy and housing market keeps doing well, I think ESNT will continue to grow and the share price will rise. If Mr. Market provides us an opportunity, I will be a buyer.
Best,
DT