Essent Group Ltd. (NYSE: ESNT)

Sector: Financial Services Industry: Insurance - Specialty CIK: 0001448893
Market Cap 6.29 Bn
P/B 1.10
P/E 8.95
P/S 4.98
ROIC (Qtr) 11.50
Div Yield % 1.45
Rev 1y % (Qtr) -1.50
Total Debt (Qtr) 494.97 Mn
Debt/Equity (Qtr) 0.09
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About

Essent Group Ltd., a Bermuda-based company with the ticker symbol ESNT, is a prominent player in the housing finance industry, offering private mortgage insurance, reinsurance, and risk management products. The company's primary business revolves around providing private mortgage insurance, a crucial component in the U.S. housing finance system as it offers credit protection to lenders and mortgage investors, thereby supporting a robust secondary mortgage market. Essent Group Ltd.'s main business activity involves the sale of private mortgage insurance...

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Investment thesis

Bull case

  • Strong operating cash flow of 853.67M provides robust 1.72x coverage of total debt 494.96M, indicating excellent debt servicing capability and financial flexibility.
  • Operating cash flow of 853.67M provides exceptional 26.11x coverage of interest expenses 32.70M, showing strong debt service capability.
  • Strong tangible asset base of 7.27B provides 14.69x coverage of total debt 494.96M, indicating robust asset backing and low credit risk.
  • Operating cash flow of 853.67M provides strong 40.62x coverage of stock compensation 21.01M, indicating sustainable incentive practices.
  • Robust free cash flow of 846.72M exceeds capital expenditure of 6.95M by 121.92x, indicating strong organic growth funding capability.

Bear case

  • Operating cash flow of 853.67M barely covers its investment activities of (220.85M), with a coverage ratio of -3.87, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 853.67M provides thin coverage of dividend payments of (121.97M) with a -7 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Free cash flow of 846.72M represents just -947.12x of debt issuance (894000), suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Retained earnings of 5.13B provide limited buffer against comprehensive income items of (165.43M), which is -31.03x, indicating elevated exposure to market risks.
  • Operating cash flow of 853.67M is outpaced by equity issuance of (527.85M) (-1.62 ratio), indicating concerning reliance on equity markets for funding operations.

Peer comparison

Companies in the Insurance - Specialty
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 FNF Fidelity National Financial, Inc. 15.24 Bn 26.24 1.40 4.77 Bn
2 MTG Mgic Investment Corp 9.59 Bn 22.01 9.04 0.65 Bn
3 AXS Axis Capital Holdings Ltd 8.36 Bn 8.51 1.33 1.49 Bn
4 FAF First American Financial Corp 7.69 Bn 14.26 1.33 2.85 Bn
5 ACT Enact Holdings, Inc. 7.02 Bn 11.97 6.39 0.74 Bn
6 RDN Radian Group Inc 6.94 Bn 35.97 5.85 1.13 Bn
7 ESNT Essent Group Ltd. 6.29 Bn 8.95 4.98 0.49 Bn
8 RYAN Ryan Specialty Holdings, Inc. 5.03 Bn 79.38 1.65 3.53 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.91 0.73
EV to Cash from Ops. EV/CFO 7.84 15.20
EV to Debt EV to Debt 13.52 34.98
EV to EBIT EV/EBIT 7.74 17.99
EV to EBITDA EV/EBITDA 7.69 18.12
EV to Free Cash Flow [EV/FCF] EV/FCF 7.90 15.91
EV to Market Cap EV to Market Cap 1.06 1.54
EV to Revenue EV/Rev 5.30 5.95
Price to Book Value [P/B] P/B 1.10 2.05
Price to Earnings [P/E] P/E 8.95 17.16
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 5.76 2.58
Dividend Payout Ratio % Div Payout % (Qtr) 12.90 39.01
Dividend per Basic Share Div per Share (Qtr) 0.90 2.02
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 10.35 72.24
Interest Coverage Int. cover (Qtr) 26.45 24.85
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 15.35 -23.49
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -16.37 -16.67
Dividend Growth (1y) % Div 1y % (Qtr) -17.43 5.97
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -4.74 22.96
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -3.75 10.55
EBIT Growth (1y) % EBIT 1y % (Qtr) -3.74 33.73
EBT Growth (1y) % EBT 1y % (Qtr) -3.62 48.63
EPS Growth (1y) % EPS 1y % (Qtr) -0.43 37.56
FCF Growth (1y) % FCF 1y % (Qtr) 0.55 -3.16
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -3.09 11.24
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.17 0.23
Cash Payout Ratio Cash Payout (Qtr) 0.14 0.51
Cash Ratio Cash Ratio 0.00 0.00
Current Ratio Current Ratio 0.00 0.06
Debt to Equity Ratio Debt/Equity (Qtr) 0.09 0.50
Interest Cover Ratio Int Coverage (Qtr) 26.45 24.85
Times Interest Earned Times Interest Earned (Qtr) 26.45 24.85
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 68.90 36.44
EBIT Margin % EBIT Margin % (Qtr) 68.46 34.51
EBT Margin % EBT Margin % (Qtr) 65.87 17.56
Gross Margin % Gross Margin % (Qtr) 89.40 74.53
Net Profit Margin % Net Margin % (Qtr) 55.60 10.78