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Shares of Cincinnati Financial Corporation CINF have rallied 31.5% year to date (YTD), outperforming the industry’s 27.2% growth. The insurer also outperformed the Zacks S&P 500 composite and the Finance sector’s return of 18.1% and 14.1%, respectively, YTD. With a market capitalization of $21.27 billion, the average volume of shares traded in the last three months was 0.6 million. Currently priced at $136.17, the stock is a little below its 52-week high of $139.34.
CINF Outperforms Industry, Sector & S&P YTD
Earnings have grown 11.90% in the past five years, better than the industry average of 10.5%. This Zacks Rank #2 (Buy) property and casualty insurance's bottom line outpaced estimates in each of the trailing four quarters, the average surprise being 27.01%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The rally was largely driven by a higher level of insured exposure, rate increase, agent-focused business model, consistent cash flow and effective capital deployment.
CINF Trading Above 50-Day Moving Average
The stock is trading above its 50-day and 200-day simple moving average (SMA) of $129.37 and $117.43, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
CINF’s Growth Projection Encourages
The Zacks Consensus Estimate for Cincinnati Financial’s 2024 earnings per share indicates a year-over-year increase of 9.1%. The consensus estimate for revenues is pegged at $9.85 billion, implying a year-over-year improvement of 10.8%. The consensus estimate for 2025 earnings per share and revenues indicates an increase of 7% and 10.1%, respectively, from the corresponding 2024 estimates.
Optimistic Analyst Sentiment on CINF
Each of the seven analysts covering the stock has raised estimates for 2024 and three analysts have raised the same for 2025 over the past 60 days. Thus, the Zacks Consensus Estimate for 2024 and 2025 moved 5.6% and 0.8% north, respectively, in the last 60 days.
CINF’s Favorable Return on Capital
Return on equity in the trailing 12 months was 9.1%, better than the industry average of 7.9%. This highlights the company’s efficiency in utilizing shareholders’ funds.
Also, the return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame, reflecting Cincinnati Financial’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 4%, better than the industry average of 6%.
Will the Bull Run Continue?
Prudent pricing, an agent-centric model, a higher level of insured exposures and disciplined expansion of Cincinnati Re should benefit premiums, the primary driver of an insurer’s top line. CINF boasts above-average industry premium growth.
The Excess and Surplus line has been performing well since its inception in 2008. This segment should continue to benefit from new business written, higher renewal written premiums and higher average renewal estimated pricing. Technology and data are also being used to identify new exposures in emerging businesses.
Improving interest income from fixed-maturity securities and a decrease in equity portfolio dividends in an improved rate environment should drive net investment income.
Notably, its free cash flow conversion has remained more than 150% over the last many quarters, reflecting its solid earnings.
CINF’s Wealth Distribution
In terms of capital management, Cincinnati Financial has returned capital to shareholders through share buybacks, regular cash dividends as well as special dividends. The board of directors had increased the annual cash dividend rate for 64 consecutive years. Its dividend yield of 2.3% is better than the industry average of 0.2%, making the stock an attractive pick for yield-seeking investors. The dividend increase reflected strong operating performance and signaled management's and the board's positive outlook and confidence in outstanding capital, liquidity and financial flexibility.
CINF’s Expensive Valuation
CINF is currently expensive. It is trading at a P/B multiple of 1.67, higher than the industry average of 1.60.
However, shares of First American Financial Corporation FAF, CNA Financial Corporation CNA and Axis Capital Holdings Limited AXS are trading at a multiple lower than the industry average.
Zacks Investment Research
Investors interested in Finance stocks should always be looking to find the best-performing companies in the group. Has Mr Cooper (COOP) been one of those stocks this year? Let's take a closer look at the stock's year-to-date performance to find out.
Mr Cooper is a member of the Finance sector. This group includes 859 individual stocks and currently holds a Zacks Sector Rank of #3. The Zacks Sector Rank considers 16 different sector groups. The average Zacks Rank of the individual stocks within the groups is measured, and the sectors are listed from best to worst.
The Zacks Rank emphasizes earnings estimates and estimate revisions to find stocks with improving earnings outlooks. This system has a long record of success, and these stocks tend to be on track to beat the market over the next one to three months. Mr Cooper is currently sporting a Zacks Rank of #1 (Strong Buy).
Over the past three months, the Zacks Consensus Estimate for COOP's full-year earnings has moved 4% higher. This shows that analyst sentiment has improved and the company's earnings outlook is stronger.
Our latest available data shows that COOP has returned about 45.1% since the start of the calendar year. At the same time, Finance stocks have gained an average of 16.6%. This means that Mr Cooper is performing better than its sector in terms of year-to-date returns.
Axis Capital (AXS) is another Finance stock that has outperformed the sector so far this year. Since the beginning of the year, the stock has returned 43.4%.
Over the past three months, Axis Capital's consensus EPS estimate for the current year has increased 5.9%. The stock currently has a Zacks Rank #1 (Strong Buy).
Breaking things down more, Mr Cooper is a member of the Financial - Consumer Loans industry, which includes 17 individual companies and currently sits at #86 in the Zacks Industry Rank. This group has gained an average of 12.4% so far this year, so COOP is performing better in this area.
Axis Capital, however, belongs to the Insurance - Property and Casualty industry. Currently, this 40-stock industry is ranked #20. The industry has moved +27.8% so far this year.
Investors with an interest in Finance stocks should continue to track Mr Cooper and Axis Capital. These stocks will be looking to continue their solid performance.
Zacks Investment Research
Have you been paying attention to shares of NMI Holdings (NMIH)? Shares have been on the move with the stock up 7.6% over the past month. The stock hit a new 52-week high of $42.09 in the previous session. NMI Holdings has gained 38.7% since the start of the year compared to the 16.6% move for the Zacks Finance sector and the 27.8% return for the Zacks Insurance - Property and Casualty industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 30, 2024, NMI Holdings reported EPS of $1.2 versus consensus estimate of $1.04 while it beat the consensus revenue estimate by 2.11%.
For the current fiscal year, NMI Holdings is expected to post earnings of $4.50 per share on $650.03 million in revenues. This represents a 17.19% change in EPS on a 12.27% change in revenues. For the next fiscal year, the company is expected to earn $4.74 per share on $692.83 million in revenues. This represents a year-over-year change of 5.33% and 6.58%, respectively.
Valuation Metrics
NMI Holdings may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
NMI Holdings has a Value Score of B. The stock's Growth and Momentum Scores are D and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 9.2X current fiscal year EPS estimates, which is not in-line with the peer industry average of 13.6X. On a trailing cash flow basis, the stock currently trades at 9.9X versus its peer group's average of 13.2X. Additionally, the stock has a PEG ratio of 0.94. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, NMI Holdings currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if NMI Holdings passes the test. Thus, it seems as though NMI Holdings shares could have potential in the weeks and months to come.
How Does NMIH Stack Up to the Competition?
Shares of NMIH have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Axis Capital Holdings Limited (AXS). AXS has a Zacks Rank of # 1 (Strong Buy) and a Value Score of A, a Growth Score of C, and a Momentum Score of A.
Earnings were strong last quarter. Axis Capital Holdings Limited beat our consensus estimate by 16.27%, and for the current fiscal year, AXS is expected to post earnings of $10.71 per share on revenue of $6.13 billion.
Shares of Axis Capital Holdings Limited have gained 6.5% over the past month, and currently trade at a forward P/E of 7.42X and a P/CF of 7.5X.
The Insurance - Property and Casualty industry is in the top 8% of all the industries we have in our universe, so it looks like there are some nice tailwinds for NMIH and AXS, even beyond their own solid fundamental situation.
Zacks Investment Research
Strange but true: seniors fear death less than running out of money in retirement.
And older Americans have legitimate reasons for this worry, even if they have dutifully saved for their golden years. That's because the traditional ways people manage retirement may no longer provide enough income to meet expenses - and with people generally living longer, the principal retirement savings is exhausted far too early in the retirement period.
The tried-and-true retirement investing approach of yesterday doesn't work today.
For many years, bonds or other fixed-income assets could produce the yield needed to provide solid income for retirement needs. However, these yields have dwindled over time: 10-year Treasury bond rates in the late 1990s were around 6.50%, but today, that rate is a thing of the past, with a slim likelihood of rates making a comeback in the foreseeable future.
The impact of this rate decline is sizable: over 20 years, the difference in yield for a $1 million investment in 10-year Treasuries is more than $1 million.
And lower bond yields aren't the only potential problem seniors are facing. Today's retirees aren't feeling as secure as they once did about Social Security, either. Benefit checks will still be coming for the foreseeable future, but based on current estimates, Social Security funds will run out of money in 2035.
So what's a retiree to do? You could cut your expenses to the bone, and take the risk that your Social Security checks don't shrink. Or you could find an alternative investment that provides a steady, higher-rate income stream to replace dwindling bond yields.
Invest in Dividend Stocks
As a replacement for low yielding Treasury bonds (and other bond options), we believe dividend-paying stocks from high quality companies offer low risk and stable, predictable income investors in retirement seek.
Look for stocks that have paid steady, increasing dividends for years (or decades), and have not cut their dividends even during recessions.
Going beyond those familiar names, you can find excellent dividend-paying stocks by following a few guidelines. Look for companies that pay a dividend yield of around 3%, with positive annual dividend growth. The growth rate is key to help combat the effects of inflation.
Here are three dividend-paying stocks retirees should consider for their nest egg portfolio.
First American Financial (FAF)
is currently shelling out a dividend of $0.54 per share, with a dividend yield of 3.18%. This compares to the Insurance - Property and Casualty industry's yield of 0.13% and the S&P 500's yield of 1.57%. The company's annualized dividend growth in the past year was 1.92%. Check First American Financial dividend history here>>>
NewtekOne (NEWT)
is paying out a dividend of $0.19 per share at the moment, with a dividend yield of 6.71% compared to the Financial - Miscellaneous Services industry's yield of 0% and the S&P 500's yield. The annualized dividend growth of the company was 5.56% over the past year. Check NewtekOne dividend history here>>>
Currently paying a dividend of $1.1 per share,
Ryman Hospitality Properties (RHP)
has a dividend yield of 4.27%. This is compared to the REIT and Equity Trust - Other industry's yield of 4.14% and the S&P 500's current yield. Annualized dividend growth for the company in the past year was 10%. Check Ryman Hospitality Properties dividend history here>>>
But aren't stocks generally more risky than bonds?
Overall, that is true. But stocks are a broad class, and you can reduce the risks significantly by selecting high-quality dividend stocks that can generate regular, predictable income and can also decrease the volatility of your portfolio compared to the overall stock market.
A silver lining to owning dividend stocks for your retirement portfolio is that many companies, especially blue chip stocks, increase their dividends over time, helping offset the effects of inflation on your potential retirement income.
Thinking about dividend-focused mutual funds or ETFs? Watch out for fees.
If you prefer investing in funds or ETFs compared to individual stocks, you can still pursue a dividend income strategy. However, it's important to know the fees charged by each fund or ETF, which can ultimately reduce your dividend income, working against your strategy. Do your homework and make sure you know the fees charged by any fund before you invest.
Bottom Line
Seeking steady, consistent income through dividends can be a smart option for financial security in retirement, whether you invest in mutual funds, ETFs, or in dividend-paying stocks.
Zacks Investment Research
Selective Insurance Group, Inc. SIGI shares have lost 7.4% in the year-to-date period against the industry’s 26% growth. It has also underperformed the Finance sector and the Zacks S&P 500 composite’s return of 13.1% and 17.9%, respectively, in the said time frame.
SIGI Lags Industry, Sector and S&P
Selective Insurance has been grappling with higher expenses over the years, primarily due to increasing loss and loss expense incurred and amortization of deferred policy acquisition costs. In the first half of 2024, the loss and loss expense ratio deteriorated 1,070 basis points (bps) year over year.
Being a property and casualty (P&C) insurer, Selective Insurance remains exposed to catastrophe loss stemming from natural disasters and weather-related events. Such a massive loss poses an inherent risk to the P&C insurance business, inducing volatility in its results. In the first half of 2024, the combined ratio deteriorated 930 bps year over year. SIGI estimates a GAAP combined ratio of 101.5%, up from the prior guidance of 96.5%.
Closing at $92.13 in the last trading session, the stock stands 16% below its 52-week high of $109.58. The stock is trading below the 200-day simple moving average (SMA) of $97.67, indicating downward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
Selective Insurance’s long-term debt of $508.8 million as of June 30, 2024, increased 1% from the 2023 level. Debt-to-total capitalization deteriorated 20 bps to 14.8% from the level as of Dec. 31, 2023. The company’s times interest earned of 16.5 in the first quarter of 2024 was slightly poor compared with 16.9 at the end of 2023, implying that its earnings are insufficient to cover interest obligations.
SIGI’s Expensive Valuation
The stock is overvalued compared with its industry. It currently has a trailing 12-month P/B ratio of 2.06, higher than the industry average of 1.58.
Shares of three other property and casualty insurers, such as NMI Holdings Inc NMIH, Palomar Holdings, Inc. PLMR and Cincinnati Financial Corporation CINF, are also trading at a multiple higher than the industry average.
Negative Analyst Sentiment
Each of the five analysts covering the stock has lowered estimates for 2024 and 2025 over the past 60 days.
The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 43.2% and 3.8% south, respectively, in the past 60 days.
While the consensus estimate for 2024 indicates a 34.8% decline from the year-ago reported figure, the consensus estimate for 2025 indicates an increase of 105.7%.
Factors Favoring SIGI Stock
Exposure growth, solid retention rates and higher new business gains in standard commercial and E&S lines should drive premium growth.
Steady betterment of premiums, improved net investment income and higher other income have resulted in top-line improvement. Over the past seven years (2017-2023), total revenues witnessed a CAGR of 8%.
The E&S Lines segment of Selective Insurance is likely to improve because of renewal pure price increases, higher direct new business and favorable E&S lines marketplace conditions.
Given impressive investment results, Selective Insurance estimates an after-tax net investment income of $360 million that includes $32 million from alternative investments for 2024. Higher income earned on fixed-income securities portfolio due to improved book yields received from the investment of operating and investing cash flows over the past year in the higher interest rate environment is likely to drive the metric.
Impressive Dividend History of Selective Insurance
Riding on a solid capital position, Selective Insurance has been hiking dividends, which registered a nine-year CAGR (2015-2023) of nearly 8.8%. It had $84.2 million remaining under authorization as of June 30, 2024. Riding on strong financial and operating performance, the board has approved a 17% hike in the quarterly cash dividend in November 2023. Such steadfast endeavors buoy confidence among investors, making it an attractive pick for yield-seeking investors. Its dividend yield of 1.5% appears attractive compared with the industry average of 0.2%.
SIGI’s Favorable Return on Capital
Return on equity in the trailing 12 months was 8.7%, better than the industry average of 7.9%. This highlights the company’s efficiency in utilizing shareholders’ funds.
Wrapping Up: Keep on Holding
While Selective Insurance remains well-poised to gain from strong renewal, fuel price increases, favorable excess and surplus (E&S) lines marketplace conditions and higher income earned on fixed-income securities portfolio, the specific challenges facing the company like exposure to catastrophe loss and escalating expenses cannot be ignored.
Despite its expensive valuation, SIGI should benefit from favorable growth estimates, higher return on capital and prudent capital deployment. It is, therefore, wise to hold on to this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks Investment Research
Here are five stocks added to the Zacks Rank #1 (Strong Buy) List today:
DXP Enterprises DXPE: This company which is a leading products and service distributor that adds value and total cost savings solutions to industrial customers throughout the United States, Canada, Mexico and Dubai, has seen the Zacks Consensus Estimate for its current year earnings increasing 12.7% over the last 60 days.
DXP Enterprises, Inc. Price and Consensus
DXP Enterprises, Inc. price-consensus-chart | DXP Enterprises, Inc. Quote
The Progressive PGR: This company which is a leading independent agency writer of private passenger auto coverage, and the market share leader for the motorcycle products since 1998, has seen the Zacks Consensus Estimate for its current year earnings increasing 11% over the last 60 day.
The Progressive Corporation Price and Consensus
The Progressive Corporation price-consensus-chart | The Progressive Corporation Quote
SK Telecom Co. SKM: This company which is the world's first commercial CDMA digital cellular service, has seen the Zacks Consensus Estimate for its current year earnings increasing 7.5% over the last 60 days.
SK Telecom Co., Ltd. Price and Consensus
SK Telecom Co., Ltd. price-consensus-chart | SK Telecom Co., Ltd. Quote
Axis Capital Holdings AXS: This company which provides a broad range of specialty insurance and reinsurance solutions to its clients on a worldwide basis, has seen the Zacks Consensus Estimate for its current year earnings increasing 6.7% over the last 60 days.
Axis Capital Holdings Limited Price and Consensus
Axis Capital Holdings Limited price-consensus-chart | Axis Capital Holdings Limited Quote
Canadian Imperial Bank of Commerce CM: This leading North American financial institution that offers a full range of products and services through its comprehensive electronic banking network, branches and offices across Canada, in the United States and around the world, has seen the Zacks Consensus Estimate for its current year earnings increasing 6.1% over the last 60 days.
Canadian Imperial Bank of Commerce Price and Consensus
Canadian Imperial Bank of Commerce price-consensus-chart | Canadian Imperial Bank of Commerce Quote
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks Investment Research
Shares of Kinsale Capital Group, Inc. KNSL have rallied 38.7% year to date (YTD), outperforming the industry’s 26% growth. The insurer also outperformed the Zacks S&P 500 composite and the Finance sector’s return of 17.8% and 13.2%, respectively, YTD. With a market capitalization of $10.81 billion, the average volume of shares traded in the last three months was 0.1 million.
KNSL Outperforms Industry, Sector & S&P YTD
The rally was largely driven by a focus on the excess and supply (E&S) market, prudent underwriting, lower expense ratio, growth in the investment portfolio, solid growth projections and effective capital deployment.
This property and casualty insurer has a solid track record of beating earnings estimates in each of the last four quarters, the average being 9.28%.
KNSL has a VGM Score of B. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.
KNSL Trading Above 50-Day Moving Average
This Zacks Rank #3 (Hold) insurance broker closed at $464.53 on Friday, above its 50-day and 200-day simple moving average (SMA) of $442.60 and $421, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Optimistic Analyst Sentiment for KNSL
Each of the seven analysts covering the stock has raised estimates for 2024, while five analysts have raised the same for 2025 over the past 60 days. Thus, the Zacks Consensus Estimate for 2024 and 2025 moved 2.2% and 1.4% north, respectively, in the last 60 days, reflecting analyst optimism.
Growth Projection for KNSL
The Zacks Consensus Estimate for Kinsale Capital’s 2024 earnings per share indicates an increase of 22.4% from the year-ago reported number. The consensus estimate for revenues is pegged at $1.58 billion, implying a year-over-year improvement of 29.7%.
The consensus estimate for 2025 earnings per share and revenues indicates an increase of 18.6% and 19%, respectively, from the corresponding 2024 estimates.
Earnings have grown 45.7% in the past five years, better than the industry average of 10.5%. The expected long-term earnings growth rate is 15%, outperforming the industry average of 11.1%.
Will the Bull Run Continue?
Premiums should continue to improve, given the company’s strong presence across the E&S market in the United States and high retention rates stemming from contract renewals. Management noted that the E&S market has witnessed significant growth and generated better underwriting results than the broader P&C industry. It remains well-poised to benefit from continued market dislocation, aiding improved submission flows and better pricing decisions.
KNSL’s solid market presence helped it to deliver improved margins and lower loss ratios. The insurer targets clients with small-sized and medium-sized accounts with better pricing and less prone to competition. Management estimates low double-digit rate increases across the book of business.
Kinsale Capital enjoys the best combination of high growth and low combined ratio among its peers. It targets a combined ratio in the mid-80s range over the long term. Also, KNSL is well-poised to generate an improved expense ratio given its proprietary technology platform, which is likely to provide it with a competitive edge over other industry players and scalability in business.
Investment of excess operating funds at higher rates in an improved rate environment should drive investment results. Notably, its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.
The insurer has increased dividends since 2017 at a seven-year (2017-2024) CAGR of 12%, riding on the strength of operational excellence that supports a solid capital position.
KNSL’s Favorable Return on Capital
Return on equity in the trailing 12 months was 30.3%, better than the industry average of 7.9%. This highlights the company’s efficiency in utilizing shareholders’ funds.
Also, the return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame, reflecting ACGL’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 25.4%, better than the industry average of 6%.
KNSL’s Expensive Valuation
KNSL is currently expensive. It is trading at a P/B multiple of 8.60, higher than the industry average of 1.58.
Shares of other insurers like Arch Capital Group Ltd. ACGL and NMI Holdings Inc NMIH are also trading at a multiple higher than the industry average.
However, shares of CNA Financial Corporation CNA are trading at a multiple lower than the industry average.
Zacks Investment Research
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