Last Update 22 Oct 25
Analysts Raise Essent Group Price Targets on Improved Credit Performance and Strong Execution
Analysts have raised their price targets for Essent Group, increasing the consensus from $67 to $71 as they cite improved credit performance, along with continued strength in expense and tax management.
Analyst Commentary
Following recent price target increases for Essent Group, analysts have shared insights into the core drivers affecting their updated outlooks on the firm. Their commentaries reflect both optimism and ongoing caution as they evaluate Essent's valuation, operating performance, and growth prospects.
Bullish Takeaways- Bullish analysts highlight improved credit performance. Solid quarterly results demonstrate the company’s ability to outperform expectations.
- Continued strength in expense and tax management is seen as a differentiator and enhances profitability relative to peers.
- Efficiency in operating metrics and risk controls contributes to upward revisions in valuation, pushing targets higher.
- Strong execution in core business areas supports confidence in Essent's growth outlook over the near to medium term.
- Some analysts remain cautious and retain neutral ratings, citing a fairly valued share price even after the recent positive performance.
- Concerns persist around the sustainability of recent credit trends, especially in changing macroeconomic conditions.
- Ongoing monitoring is advised regarding competitors’ operational improvements, which could challenge Essent’s relative advantage over time.
What's in the News
- Essent Group completed the repurchase of 4,175,650 shares between April 1, 2025 and July 31, 2025. This represents 4.07 percent of shares outstanding for a total cost of $240.21 million (Key Developments).
- Of these, 3,995,318 shares were repurchased in the latest tranche for $230.07 million, reflecting an ongoing commitment to capital return (Key Developments).
- This buyback activity was carried out under the program announced on February 14, 2025 (Key Developments).
Valuation Changes
- The discount rate has decreased slightly from 7.55 percent to 7.54 percent, indicating a marginal reduction in perceived risk or required return.
- Revenue growth expectations have increased modestly from 2.23 percent to 2.30 percent, reflecting improved growth projections.
- The net profit margin is nearly unchanged, moving fractionally lower from 50.83 percent to 50.81 percent.
- The future P/E ratio has decreased marginally from 9.63x to 9.61x, showing a minor adjustment in earnings multiple assumptions.
- Consensus analyst fair value remains stable at $67.50, with no change from prior estimates.
Key Takeaways
- Growth in homeownership and digital transformation support ongoing demand, pricing precision, and potential margin expansion in mortgage insurance.
- Diversification into risk management and strong capital discipline enhance stability, fee-based revenues, and shareholder returns.
- Structural industry changes, technology disruption, and housing market headwinds threaten Essent Group's core revenue streams, competitive position, and future growth prospects.
Catalysts
About Essent Group- Through its subsidiaries, provides private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States.
- Anticipated long-term growth in homeownership, especially among Millennials and Gen Z, supports steady demand for Essent's core mortgage insurance business, expected to drive sustained increases in policy originations and top-line revenue.
- Management is leveraging ongoing digital transformation and advanced analytics, including the proprietary EssentEDGE platform and AI adoption, to price risk more precisely and streamline underwriting, which should help maintain or expand net margins over time.
- The company's expansion into adjacent credit risk management, through reinsurance (Essent Re) and advisory services, provides new and growing fee-based revenue streams, which support long-term earnings growth and diversification beyond traditional mortgage insurance.
- Essent's strong capital position is enabling substantial buybacks at undervalued price levels, which, combined with disciplined capital allocation and book value growth, is likely to increase earnings per share and shareholder returns.
- Embedded equity in the insured portfolio and prudent credit standards reduce future loss ratios and claims exposure, supporting stable profitability and the resilience of net margins even through housing cycles.
Essent Group Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Essent Group's revenue will grow by 2.0% annually over the next 3 years.
- Analysts assume that profit margins will shrink from 56.4% today to 51.9% in 3 years time.
- Analysts expect earnings to reach $699.0 million (and earnings per share of $7.8) by about September 2028, down from $714.8 million today. The analysts are largely in agreement about this estimate.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.3x on those 2028 earnings, up from 8.7x today. This future PE is lower than the current PE for the US Diversified Financial industry at 16.5x.
- Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 7.59%, as per the Simply Wall St company report.
Essent Group Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Stagnant wage growth and persistent housing affordability challenges may significantly slow the entry of first-time homebuyers, reducing demand for private mortgage insurance and potentially leading to lower long-term policy volumes and revenue growth for Essent Group.
- Heavy reliance on Fannie Mae and Freddie Mac for business flow exposes Essent to the risk of regulatory reforms or shifts towards government alternatives, which could directly reduce Essent's top-line revenue if GSE preferences change or if market structure evolves.
- Industry-wide adoption of alternative credit models, fintech-driven innovations, and artificial intelligence for mortgage underwriting may disrupt traditional PMI business models, undermining Essent's competitive edge and impacting both net margins and earnings consistency if the company fails to keep pace or successfully innovate.
- A slowdown in home price appreciation, or even negative home price trends in certain markets, could increase Essent's exposure to claims and loss ratios on recent vintages that lack sufficient embedded equity, thereby pressuring net income and potentially eroding book value over time.
- Increased use of mortgage risk-transfer transactions by GSEs (e.g., credit risk transfers, insurance-linked securities) might structurally reduce the need for traditional private mortgage insurance, shrinking Essent's addressable market and impairing long-term revenue and profitability.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $66.25 for Essent Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $70.0, and the most bearish reporting a price target of just $59.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.3 billion, earnings will come to $699.0 million, and it would be trading on a PE ratio of 9.3x, assuming you use a discount rate of 7.6%.
- Given the current share price of $63.05, the analyst price target of $66.25 is 4.8% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Read more narratives
There are no other narratives for this company.
View all narratives