Enact Holdings trades at $40.58 per share and has stayed right on track with the overall market, gaining 7% over the last six months. At the same time, the S&P 500 has returned 11%.

Is now the time to buy Enact Holdings, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Do We Think Enact Holdings Will Underperform?

We’re swiping left on Enact Holdings for now. Here are three reasons why there are better opportunities than ACT, plus one stock we’d rather own.

1. Net Premiums Earned Hit a Plateau

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:

• Gross premiums - what’s ceded to reinsurers as a risk mitigation and transfer strategy

Enact Holdings’s net premiums earned was flat over the last five years, much worse than the broader insurance industry. This shows that policy underwriting underperformed its other business lines.

2. Projected Revenue Growth Shows Limited Upside

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Enact Holdings’s revenue to stall, a slight deceleration versus its 3.1% annualized growth for the past two years. This projection is underwhelming and suggests its products and services will face some demand challenges.

3. EPS Barely Growing

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

Enact Holdings’s full-year EPS grew at an unimpressive 6.3% compounded annual growth rate over the last four years, worse than the broader insurance sector.

Final Judgment

We cheer for all companies serving everyday consumers, but in the case of Enact Holdings, we’ll be cheering from the sidelines. That said, the stock currently trades at 1× forward P/B (or $40.58 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. There are superior stocks to buy right now. We’d recommend looking at the Amazon and PayPal of Latin America.

Stocks We Like More Than Enact Holdings

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