What a brutal six months it’s been for Stewart Information Services. The stock has dropped 20.1% and now trades at $58.93, rattling many shareholders. This might have investors contemplating their next move.

Is there a buying opportunity in Stewart Information Services, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Why Is Stewart Information Services Not Exciting?

Even though the stock has become cheaper, we're cautious about Stewart Information Services. Here are three reasons there are better opportunities than STC and a stock we'd rather own.

1. Net Premiums Earned Point to Soft Demand

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore gross premiums less what’s ceded to reinsurers as a risk mitigation and transfer strategy.

Stewart Information Services’s net premiums earned has grown at a 2% annualized rate over the last five years, much worse than the broader insurance industry and slower than its total revenue.

2. EPS Trending Down

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sadly for Stewart Information Services, its EPS declined by 4.8% annually over the last five years while its revenue grew by 5%. This tells us the company became less profitable on a per-share basis as it expanded.

3. Substandard BVPS Growth Indicates Limited Asset Expansion

Book value per share (BVPS) serves as a key indicator of an insurer’s financial stability, reflecting a company’s ability to maintain adequate capital levels and meet its long-term obligations to policyholders.

Although Stewart Information Services’s BVPS increased by 7.6% annually over the last five years, growth has recently decelerated to a sluggish 4.1% over the past two years (from $50.11 to $54.30 per share).

Final Judgment

Stewart Information Services isn’t a terrible business, but it doesn’t pass our quality test. After the recent drawdown, the stock trades at 1× forward P/B (or $58.93 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. We’d recommend looking at the most entrenched endpoint security platform on the market.

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