Stock Analysis

Investors in Essent Group (NYSE:ESNT) have seen notable returns of 37% over the past three years

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NYSE:ESNT

Investors can buy low cost index fund if they want to receive the average market return. But across the board there are plenty of stocks that underperform the market. That's what has happened with the Essent Group Ltd. (NYSE:ESNT) share price. It's up 29% over three years, but that is below the market return. In the last year the stock has gained 10%.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Essent Group

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Essent Group was able to grow its EPS at 7.5% per year over three years, sending the share price higher. We note that the 9% yearly (average) share price gain isn't too far from the EPS growth rate. Coincidence? Probably not. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

NYSE:ESNT Earnings Per Share Growth February 10th 2025

We know that Essent Group has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Essent Group will grow revenue in the future.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Essent Group the TSR over the last 3 years was 37%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Essent Group shareholders are up 12% for the year (even including dividends). Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 6% per year over five year. It is possible that returns will improve along with the business fundamentals. Before spending more time on Essent Group it might be wise to click here to see if insiders have been buying or selling shares.

We will like Essent Group better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

Valuation is complex, but we're here to simplify it.

Discover if Essent Group might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.