AMERISAFE, Inc. ( AMSF Quick Quote AMSF - Free Report) is well-poised to grow due to rising audit premiums amid rate declines and net investment income. Given the company’s experience in the high-hazard business, it expects to retain policyholders and attract new business in the future.
AMERISAFE, with a market cap of $1 billion, is a leading specialty provider of workers’ compensation insurance, which markets and underwrites its insurance through subsidiaries. The company focuses on providing coverage to small to mid-sized employers engaged in hazardous industries. It primarily operates in trucking, logging, construction, agriculture, maritime and other industries.
Zacks Rank & Price Performance
AMERISAFE currently carries a Zacks Rank #2 (Buy). Its shares have gained 0.7% in the year-to-date period against the
industry’s 1.7% decline. Image Source: Zacks Investment Research Rising Estimates
The Zacks Consensus Estimate for AMERISAFE’s 2023 earnings per share is pegged at $2.91. It has witnessed one upward estimate revision in the past 60 days against none in the opposite direction. The consensus estimate for 2023 revenues is pegged at $303.8 million, indicating 1.5% growth from the prior-year reported figure.
The company beat earnings estimates in each of the last four quarters, the average beat being 24%.
Return on Equity (ROE)
ROE, a measure reflecting how efficiently a company utilizes shareholders’ money, was 16.9% in the trailing 12 months, better than the industry’saverage of 15.1%.
Due to its AMERISAFE’s vast experience as a provider of workers’ compensation insurance in hazardous industries and a disciplined risk selection approach, AMERISAFE fetches higher premiums. A rebounding economy, a decline in COVID-variant spikes and enhanced agent relations are likely to support its new business growth. Strong audit premiums amid a soft rate market are expected to drive premium revenues in the future.
Net investment income is expected to gain from from higher yields on fixed maturity securities and cash and cash equivalents. The metric increased 21.6% in the first quarter. We expect net investment income to increase 10.5% in 2023.
The company’s strong financial flexibility, with no debt and an increasing operating cash flow, is impressive. In the first quarter, the company generated an operating cash flow of $13.5 million, up 89.2% from the prior-year figure.
The company’s financial flexibility allows it to engage in shareholder-friendly moves. The company handsomely returns capital to investors through share repurchases and dividends. It did not repurchase any shares in the first quarter but paid a quarterly cash dividend of 34 cents per share. Its dividend yield of 2.6%. was higher than the industry’s average of 2.4%. As of Mar 31, 2023, $12.6 million was left under the authorized share buyback program.
A Risk to Keep an Eye on
There are a few factors that are impeding growth of AMSF. The company faces stiff market competition, which somewhat affects its pricing. Also, product concentration risks and elevated expenses level are concerning.
Total expenses increased 5.1% year over year to $56.9 million in the first quarter.This can affect its future operations. Nevertheless, a systematic and strategic plan will drive AMSF’s long-term growth.
Other Key Picks
Some other top-ranked stocks from the broader Finance space are
American Equity Investment Life Holding Company ( AEL Quick Quote AEL - Free Report) , Manulife Financial Corporation ( MFC Quick Quote MFC - Free Report) and Primerica, Inc. ( PRI Quick Quote PRI - Free Report) . Each of these companies presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .
American Equity’s bottom line outpaced estimates in three of the trailing four quarters and missed once. The average earnings surprise is 13%.
The Zacks Consensus Estimate for AEL’s 2023 earnings indicates a 77.7% rise. The Zacks Consensus Estimate for AEL’s 2023 revenues is pegged at $2.2 billion.
Manulife Financial’s bottom line outpaced estimates in three of the trailing four quarters and missed once. The average earnings surprise is 1.6%.
The Zacks Consensus Estimate for MFC’s 2023 earnings indicates a 2.5% rise, while the same for revenues suggests 4.5% growth from the prior-year reported figures.
The bottom line of Primerica outpaced the Zacks Consensus Estimate in three of the last four quarters and missed once, the average surprise being 3.8%.
The Zacks Consensus Estimate for PRI’s 2023 earnings indicates a 34% rise, while the same for revenues suggests 4.6% growth from the prior-year reported figures.