Head-To-Head Review: Essent Group (ESNT) versus Universal Insurance (UVE)

Essent Group (NYSE: ESNT) and Universal Insurance (NYSE:UVE) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, risk, earnings, valuation, analyst recommendations, dividends and institutional ownership.

Profitability

This table compares Essent Group and Universal Insurance’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Essent Group 51.64% 18.55% 13.15%
Universal Insurance 11.55% 20.90% 6.30%

Insider & Institutional Ownership

86.6% of Essent Group shares are held by institutional investors. Comparatively, 78.2% of Universal Insurance shares are held by institutional investors. 18.1% of Essent Group shares are held by company insiders. Comparatively, 10.5% of Universal Insurance shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Risk and Volatility

Essent Group has a beta of 1.15, suggesting that its share price is 15% more volatile than the S&P 500. Comparatively, Universal Insurance has a beta of 1.9, suggesting that its share price is 90% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current recommendations and price targets for Essent Group and Universal Insurance, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Essent Group 0 1 8 0 2.89
Universal Insurance 0 0 1 0 3.00

Essent Group currently has a consensus target price of $49.89, suggesting a potential upside of 13.59%. Universal Insurance has a consensus target price of $32.00, suggesting a potential upside of 7.93%. Given Essent Group’s higher possible upside, equities analysts plainly believe Essent Group is more favorable than Universal Insurance.

Valuation and Earnings

This table compares Essent Group and Universal Insurance’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Essent Group $458.26 million 9.43 $222.60 million $2.99 14.69
Universal Insurance $685.29 million 1.49 $99.41 million $2.34 12.67

Essent Group has higher earnings, but lower revenue than Universal Insurance. Universal Insurance is trading at a lower price-to-earnings ratio than Essent Group, indicating that it is currently the more affordable of the two stocks.

Dividends

Universal Insurance pays an annual dividend of $0.56 per share and has a dividend yield of 1.9%. Essent Group does not pay a dividend. Universal Insurance pays out 23.9% of its earnings in the form of a dividend.

Summary

Essent Group beats Universal Insurance on 11 of the 16 factors compared between the two stocks.

Essent Group Company Profile

Essent Group Ltd. is a private mortgage insurance company. The Company is engaged in offering private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. Its products and services include mortgage insurance, contract underwriting, and Bermuda-based insurance and reinsurance. The Company’s primary mortgage insurance is offered to customers on individual loans at the time of origination on a flow basis, but can also be written in bulk transactions. Its pool insurance provides additional credit enhancement for certain secondary market and other mortgage transactions. The primary mortgage insurance operations were conducted through Essent Guaranty, Inc. which is a mortgage insurer licensed to write mortgage insurance in all 50 states and the District of Columbia, as of December 31, 2016. It offers primary mortgage insurance, pool insurance and master policy. It provides contract underwriting services through CUW Solutions, LLC.

Universal Insurance Company Profile

Universal Insurance Holdings, Inc. (UVE) is a private personal residential homeowners insurance company in Florida. The Company performs substantially all aspects of insurance underwriting, policy issuance, general administration, and claims processing and settlement internally. The Company’s subsidiaries include Universal Property & Casualty Insurance Company (UPCIC) and American Platinum Property and Casualty Insurance Company (APPCIC). UPCIC writes homeowners insurance policies in states, including Alabama, Delaware, Florida, Georgia, Hawaii, Indiana, Maryland, Massachusetts, Michigan, Minnesota, North Carolina, Pennsylvania, South Carolina and Virginia. APPCIC writes homeowners and commercial residential insurance policies in Florida. The Company has developed a suite of applications that provide underwriting, policy and claim administration services, including billing, policy maintenance, inspections, refunds, commissions and data analysis.

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