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Is Essent Group (ESNT) a Good Pick for Value Investors?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Essent Group (ESNT - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Essent Group has a trailing twelve months PE ratio of 7.94, as you can see in the chart below:
Image Source: Zacks Investment Research
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.97. If we focus on the long-term PE trend, Essent Group’s current PE level puts it below its midpoint (which is 8.09) over the past five years. Moreover, the current level stands well below the highs for the stock, suggesting that it can be a solid entry point.
Image Source: Zacks Investment Research
Further, the stock’s PE also compares favorably with the Zacks classified Finance sector’s trailing twelve months PE ratio, which stands at 14.38. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
Image Source: Zacks Investment Research
We should also point out that Essent Group has a forward PE ratio (price relative to this year’s earnings) of just 7.75, so it is fair to say that a slightly more value-oriented path may be ahead for Essent Group stock in the near term too.
PEG Ratio
While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate). The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.
Essent Group’s PEG ratio stands at just 0.78, compared with the Zacks Computer-Mini industry average of 1.02. This suggests a decent undervalued trading relative to its earnings growth potential right now.
Image Source: Zacks Investment Research
Broad Value Outlook
In aggregate, Essent Group currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Essent Group a solid choice for value investors, and some of its other key metrics make this pretty clear too.
What About the Stock Overall?
Though Essent Group might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of F and a Momentum score of ‘D’. This gives ESNT a Zacks VGM score—or its overarching fundamental grade—of ‘D’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s current quarter and full year earnings estimates have not witnessed any Meanwhile, the company’s recent earnings estimates have not witnessed any revisions in the past 30 days. Both, the current quarter and full year consensus estimate have remained unchanged in a month. You can see the consensus estimate trend and recent price action for the stock in the chart below:
The stock has just a Zacks Rank #3 (Hold), which is why we are looking for in-line performance from the company in the near term.
Bottom Line
Essent Group is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (among Bottom 31% of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Financial - Mortgage & Related Services industry has clearly underperformed the broader market, as you can see below:
Image Source: Zacks Investment Research
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
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Is Essent Group (ESNT) a Good Pick for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Essent Group (ESNT - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Essent Group has a trailing twelve months PE ratio of 7.94, as you can see in the chart below:
Image Source: Zacks Investment Research
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.97. If we focus on the long-term PE trend, Essent Group’s current PE level puts it below its midpoint (which is 8.09) over the past five years. Moreover, the current level stands well below the highs for the stock, suggesting that it can be a solid entry point.
Image Source: Zacks Investment Research
Further, the stock’s PE also compares favorably with the Zacks classified Finance sector’s trailing twelve months PE ratio, which stands at 14.38. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
Image Source: Zacks Investment Research
We should also point out that Essent Group has a forward PE ratio (price relative to this year’s earnings) of just 7.75, so it is fair to say that a slightly more value-oriented path may be ahead for Essent Group stock in the near term too.
PEG Ratio
While earnings are certainly important, it is essential to know how much you are paying for the growth of earnings as well. One can easily do that with the PEG ratio (ratio of the P/E to the expected future earnings growth rate). The PEG ratio gives a more complete picture of the valuation of a stock than the P/E ratio.
Essent Group’s PEG ratio stands at just 0.78, compared with the Zacks Computer-Mini industry average of 1.02. This suggests a decent undervalued trading relative to its earnings growth potential right now.
Image Source: Zacks Investment Research
Broad Value Outlook
In aggregate, Essent Group currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Essent Group a solid choice for value investors, and some of its other key metrics make this pretty clear too.
What About the Stock Overall?
Though Essent Group might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of F and a Momentum score of ‘D’. This gives ESNT a Zacks VGM score—or its overarching fundamental grade—of ‘D’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s current quarter and full year earnings estimates have not witnessed any Meanwhile, the company’s recent earnings estimates have not witnessed any revisions in the past 30 days. Both, the current quarter and full year consensus estimate have remained unchanged in a month. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Essent Group Ltd. Price and Consensus
Essent Group Ltd. price-consensus-chart | Essent Group Ltd. Quote
The stock has just a Zacks Rank #3 (Hold), which is why we are looking for in-line performance from the company in the near term.
Bottom Line
Essent Group is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (among Bottom 31% of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks Financial - Mortgage & Related Services industry has clearly underperformed the broader market, as you can see below:
Image Source: Zacks Investment Research
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.