(As I think Matt’s quarterly summaries are the most informative I’m going to try to copy it here.)
Essent (ESNT) released earnings this morning and as typical, they continue their incredibly consistent performance over the past few years. Although growth is slowing, it’s still very good IMO. The thing that amazes me the most is in the last 4 years, they have never had quarterly revenue or earnings EVER go down sequentially!
The stock is up just 1-2% after the news, but that’s not unusual, they seem to be a pretty boring company that just keeps doing what they do and the stock has followed suit and is up 61% in the last year.
I started accumulating shares about a year ago when someone on this board brought the company to my attention. I purchased at $24, $26, and $34 so far and plan on buying more in the near future.
Thanks for the summary. I had forgotten that ESNT reported today, and am wondering why there are only up 1.6% after reporting such excellent numbers? I plan on digging into the reports and looking at my metrics in more detail this weekend. I’ll post the results when I have them.
As Rodney Dangerfield would say, insurance companies just don’t get any respect, even with stellar numbers like these:-)
Glad you found good fortune with your ESNT investment. We acted much the same (I was right behind you). I rarely review ESNT’s numbers the way I do those of my more worrisome investments. But it is odd - that steady upward march as if global financial conditions didn’t matter a bit.
Thanks DT, now I remember you were the one that brought ESNT to this board, thanks!
And you’re absolutely right with it being the Rodney Dangerfield of stocks. I mean it is growing revenue at just under 30% and earnings at 40% (and has been doing even higher than that for the past 4 YEARS, CONSISTENTLY!), yet it has a PE under 14. I understand it’s in the insurance industry and not tech, but if it were tech, it would have a PE of at least 30-40, probably higher.
And you’re absolutely right with it being the Rodney Dangerfield of stocks. I mean it is growing revenue at just under 30% and earnings at 40% (and has been doing even higher than that for the past 4 YEARS, CONSISTENTLY!)…
Essent is a private mortgage insurance and reinsurance company - how confident are you that their underwriting margins will hold up during market distress? Is there even a way to quantify the potential downside for an investment like this?
Maybe I’m dense but I wouldn’t have a clue, and I suspect very few people could make coherent sense of this:
Right, it is the insurance industry - it isn’t tech. Tech usually has a ton of free cash flow, recurring revenue (many times), and reliable performance during the rough times. With insurance/reinsurance, things go swimmingly for a while and then when bad news comes it can come like a raging inferno. Doesn’t mean Essent will be a bad investment (I have ZERO clue one way or the other) but at some point you have to well beyond simple ‘earnings’ numbers, right?
I was in the same boat as you when I first started looking at ESNT because of it’s very impressive YPEG a few years back. Insurance is a different animal, but there are ways to look at how well a company is performing. Take a look at my analysis for 2016 here:
If you follow the links, you’ll find detailed explanations of the valuation metrics. These metrics go well beyond simple ‘earnings’ numbers I think.
Tech usually has … reliable performance during the rough times. …you didn’t live thru 2008-9…
You are kidding, right? Do you remember 2000? In my experience, tech can and does get hammered in rough times, often with much more ferocity than other sectors. Lately, I’ve been getting a little nervous as I hear more and more investors say that tech companies don’t need to make a profit as long as they have tons of recurring revenue. Sounds vaguely familiar. Just sayin’.
I will post a quarterly update on the ESNT valuation metrics when I get a chance. Here is a link that presents ESNT performance over the last few years in a simpler format:
last note on the topic - should have kept my mouth shut as whatever success you have is good with me and I agree that I know almost nothing about this and a kick the can insurance company analysis isn’t going to make me smart enough to invest in anything like this (again, I’m dense)
but you can quote all the numbers you want but for heaven’s sake they are a private mortgage insurer operating in a wonderful environment - if that’s predictive, if you can rely on their underwriting criteria and those FICO loan scores then great, if not…
agree that not making a profit is an iffy proposition too…I was trying to refer to the actual business models themselves w/tech which tend to allow one to see balance sheet related blowups before they happen but of course you are 100% right that volatility follows the industry closely too so mine comment was pretty bad
understand, I’m not criticizing your idea - it is your idea - but the idea that is it readily accessible - seems nuts. But again, just my very dense view. Very personal one.