After Essent Group Ltd.’s (NYSE:ESNT) earnings announcement in December 2018, the consensus outlook from analysts appear somewhat bearish, with earnings expected to grow by 9.6% in the upcoming year relative to the higher past 5-year average growth rate of 46%. Presently, with latest-twelve-month earnings at US$467m, we should see this growing to US$512m by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.
Exciting times ahead?
The view from 10 analysts over the next three years is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. To get an idea of the overall earnings growth trend for ESNT, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
By 2022, ESNT’s earnings should reach US$635m, from current levels of US$467m, resulting in an annual growth rate of 9.5%. EPS reaches $6.43 in the final year of forecast compared to the current $4.8 EPS today. Analysts are predicting this high revenue growth to squeeze profit margins over time, from 65% to 62% by the end of 2022.
Future outlook is only one aspect when you’re building an investment case for a stock. For Essent Group, there are three pertinent aspects you should further examine:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Essent Group worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Essent Group is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Essent Group? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.