Shares of Amerisafe Inc. AMSF climbed to a new 52-week high of $46.89 on Apr 9, 2015. Notably, this workers’ compensation insurer’s shares have surged 11.4% since the beginning of 2015.
Yesterday’s closing price represents a modest six-month return of about 17%, against 13.6% clocked by the Nasdaq index. While 44.2K shares exchanged hands in the latest trading session, the average volume of shares traded over the last three months stands at approximately 74.1K.
Despite pricing and competitive challenges in the highly hazardous workers' compensation insurance industry, Amerisafe’s improved core fundamentals are driving the growth momentum. Improved financial performance, prudent enterprise management and effective capital deployment are buoying investors and analysts’ confidence in this Zacks Rank #1 (Strong Buy) stock.
Rationale
Amerisafe has delivered positive earnings surprises in three of the last four quarters with a favorable average beat of 7.7%. On Feb 26, Amerisafe reported fourth-quarter operating earnings per share of 87 cents topping the Zacks Consensus Estimate by 16%.
Although higher-than-expected underwriting and operating expenses led to a year-over-year fall in underwriting results and earnings, the top-line improved due to improved frequency trends and premiums. Meanwhile, a strong asset base and capital position not only boosted book value but also aided the 25% dividend hike in February this year. Favorable trends also induced the workers' compensation industry to record an underwriting profit for only the third time in 25 years in 2014.
Basking on a solid 2014, Amerisafe’s growth cycle appears promising given its consistently prudent reserve analytics as well as controlled loss and loss adjustment expenses going forward. The company is well-positioned to capitalize on changing market dynamics, whereby the workers' compensation market remains firm as carriers re-evaluate their positions, thereby providing a boost to the company’s fundamental growth. Alongside a strong cash flow position and appreciated investment portfolio support liquidity and shareholders’ confidence in the stock.
Peer Take
Some of the promising picks that scaled new 52-week highs yesterday include Aflac Inc. AFL, AmTrust Financial Services Inc. AFSI and Markel Corp. MKL. Each of their performances reflect animproved fundamental growth outlook, which are poised to enhance returns over time.
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