Employers Holdings’s 13.4% return over the past six months has outpaced the S&P 500 by 6.1%, and its stock price has climbed to $50.56 per share. This run-up might have investors contemplating their next move.
Is now the time to buy Employers Holdings, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Do We Think Employers Holdings Will Underperform?
We’re happy investors have made money, but we’re swiping left on Employers Holdings for now. Here are three reasons why there are better opportunities than EIG, plus one stock we’d rather own.
1. Net Premiums Earned Point to Soft Demand
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 therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.
Employers Holdings’s net premiums earned has grown at a 1.7% annualized rate over the last two years, much worse than the broader insurance industry.
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Employers Holdings, its EPS declined by 29.6% annually over the last five years while its revenue grew by 2.9%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
Employers Holdings doesn’t pass our quality test. With its shares outperforming the market lately, the stock trades at 1× forward P/B (or $50.56 per share). This multiple tells us a lot of good news is priced in - we think other companies feature superior fundamentals at the moment. Let us point you toward the Amazon and PayPal of Latin America.
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