Compass Point Research & Trading LLC analyst Chris Gamaitoni upgraded Essent Group Ltd. to "buy" from "neutral," expecting premium growth to drive outperformance in the next few years.
The analyst said he does not see any near-term potential negative catalysts for the company after its recent equity raise put it in a strong Private Mortgage Insurer Eligibility Requirements position.
Consensus premium growth for Essent Group forecasts a year-over-year decline for 2017, 2018 and 2019. However, he expects the company's insurance-in-force growth to be "substantially higher" than consensus premium growth even without further market share gains.
"Essent remains the clean mortgage insurance growth play, which has already grown into its expense base and simply needs to prudently take the market opportunity at hand to be successful," Gamaitoni wrote.
He raised his price target for the company to $50 from $38. The analyst lowered his 2017 EPS estimate to $3.03 from $3.07, increased his 2018 EPS estimate to $3.84 from $3.47 and set his 2019 EPS estimate at $4.91.
Gamaitoni is assuming coverage of the mortgage insurance industry from Fred Small, according to Compass Point.