AXIS Capital Holdings Limited’s AXS focus on expansion into new verticals, the increasing popularity of index products in the market, solid balance sheet and effective capital deployment make it worth adding to one’s portfolio.
AXS has a decent history of delivering earnings surprises. It beat earnings estimates in three of the last four reported quarters while missing in one. Earnings of this leading specialty insurer and global reinsurer, aiming leadership in specialty risks, increased 38.9% in the past five years, better than the industry average of 17%.
This insurer has an impressive VGM Score of B. This helps to identify stocks with the most attractive value, growth and momentum.
Return on equity was 13.3% in the trailing 12 months, better than the industry average of 6.9%. AXIS Capital eyes a low-90s combined ratio to fuel attractive ROE.
Zacks Rank & Price Performance
AXIS Capital currently carries a Zacks Rank #2 (Buy). In the past six months, the stock has gained 0.3% compared with the industry’s increase of 7%.
Image Source: Zacks Investment Research
Optimistic Growth Projections
The Zacks Consensus Estimate for 2023 earnings is pegged at $7.74 per share, implying an increase of 23% from the year-ago reported figure on 33.2% higher revenues of $5.7 billion. The consensus estimate for 2024 earnings is pegged at $8.60, implying an increase of 11.1% from the year-ago reported figure on 6% higher revenues of $6 billion.
The expected long-term earnings growth rate is pegged at 5%.
The company continues to focus on shifting its portfolio mix — about 75% specialty insurance and 25% reinsurance in 2023. Rate increase, prudent underwriting and PML reductions supported by third-party capital should continue to improve the risk-adjusted return for the specialty insurer. AXIS Capital expects disciplined pricing to continue in insurance and reinsurance through 2023.
AXIS Capital has been growing its business lines that are likely to provide a solid double-digit return on equity opportunities. This insurer remains focused on delivering sustained profitable growth and increased shareholder value.
In tandem with the industry’s trend of accelerated digitalization, AXS has been investing in technology, which will help it effectively use data, ensure higher-value processes and activities, support new lines of business and enable efficient operations.
AXS’ sturdy capital position supports effective capital deployment. AXS has increased its dividend at a seven-year CAGR (2015 – 2022) of 5.3%. AXS has raised dividend for 18 straight years and targets a 35-45% dividend payout over the medium term. AXS also has $100 million remaining under its authorization.
AXS shares are trading at a price-to-book value multiple of 1.05, lower than the industry average of 1.41. It has a favorable Value Score of A. Back-tested results have shown that stocks with a Value Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or #2, are best investment opportunities.
Other Stocks to Consider
Some other top-ranked stocks from the insurance industry are HCI Group HCI, RLI Corporation RLI and Kinsale Capital Group KNSL, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for HCI Group’s 2023 and 2024 earnings indicates a year-over-year increase of 149.3% and 35.2%, respectively. HCI delivered a four-quarter average earnings surprise of 308.82%.
The consensus estimate for 2023 and 2024 earnings has moved up 22.7% and 14.1%, respectively, in the past seven days. Shares of HCI have gained 47.5% year to date.
RLI delivered a four-quarter average earnings surprise of 43.50%. Year to date, the insurer has gained 5%.
The Zacks Consensus Estimate for RLI’s 2023 earnings indicates a year-over-year increase of 4.1%.
Kinsale Capital delivered a four-quarter average earnings surprise of 14.77%. Year to date, the insurer has gained 36.1%.
The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings indicates a year-over-year increase of 32.9% and 19.7%, respectively.
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