Kinsale Capital (KNSL – Free Report) shares have lost 8.2% year to date, underperforming its industry, the sector and the Zacks S&P 500 composite’s return
The stock is trading way below its 52-week high. KNSL shares are trading below the 50-day moving average, indicating a bearish trend.
Kinsale Capital is set to grow on the excess and surplus lines of business, high retention rates arising from renewals and lower loss ratio.
KNSL Vs Industry, Sector & S&P
Image Source: Zacks Investment Research
KNSL Shares are Expensive
KNSL shares are trading at a premium to the industry. Its price-to-book of 6.72X is higher than the industry average of 1.65X.
Image Source: Zacks Investment Research
This company has a market capitalization of $10 billion. The average volume of shares traded in the last three months was 0.2 million.
The stock is expensive compared with other players like Everest Group (EG – Free Report) and Corebridge Financial (CRBG – Free Report) , which are trading at a discount to the industry.
Optimistic Growth for KNSL
The Zacks Consensus Estimate for 2025 earnings of $17.49 implies an 8.9% year-over-year increase on 13.3% higher revenues of $1.8 billion. The consensus estimate for 2026 earnings of $20.91 implies a 19.6% year-over-year increase on 14.4% higher revenues of $2.1 billion.
KNSL has a Growth Score of B. The expected long-term earnings growth rate is pegged at 15%, better than the industry average of 7.9%.
Factors Favoring KNSL Stock
A strong presence across the E&S market in the United States and high retention rates stemming from contract renewals should drive improved premiums. Management noted that the E&S market has grown significantly and generated better underwriting results than the broader P&C industry. It remains well-poised to benefit from continued market dislocation, aiding improved submission flows and better pricing decisions.
KNSL has been successfully delivering improved margins and lower loss ratios. The insurer targets clients with small-sized and medium-sized accounts with better pricing and less prone to competition. Management estimates low double-digit rate increases across the book of business.
Kinsale Capital enjoys the best combination of high growth and low combined ratio among its peers. It targets a combined ratio in the mid-80s range over the long term.
KNSL is well-poised to generate an improved expense ratio, given its proprietary technology platform, which is likely to provide it with a competitive edge over other industry players and scalability in business. The insurer drives profitability and operational efficiency using analytics.
Despite a low interest rate environment, investment income should benefit from the investment of excess operating funds.
Notably, its free cash flow conversion has remained more than 85% over the last many quarters, reflecting its solid earnings.
KNSL’s Favorable Return on Capital
Kinsale Capital’s return on equity (ROE) for the trailing 12 months is 28%, which compared favorably with the industry’s 7.6%, reflecting the company’s efficiency in utilizing shareholders’ funds. This insurer targets mid-teens ROE over the long term.
Also, return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame, reflecting KNSL’s efficiency in utilizing funds to generate income. ROIC for the trailing 12 months was 24.1%, which compared favorably with the industry’s 5.8%.
Average Target Price for KNSL Suggests an Upside
Based on short-term price targets offered by nine analysts, the Zacks average price target is $477.78 per share. The average suggests a potential 11.6% upside from the last closing price.
Parting Thoughts on KNSL Stock
Kinsale Capital is poised to gain from its focus on the excess and supply (E&S) market, prudent underwriting, lower expense ratio, growth in the investment portfolio and effective capital deployment.
The insurer has an impressive dividend history, increasing dividends since 2017 at a seven-year CAGR (2017-2024) of 12.1%, riding on the strength of operational excellence that supports a solid capital position. As part of wealth distribution, in October 2024, the board of directors authorized a share repurchase program authorizing the repurchase of up to $100 million of common stock.
However, given its expensive valuation, it is better to wait for some more time before taking a call on this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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