Employers Holdings trades at $49.49 per share and has stayed right on track with the overall market, gaining 13.3% over the last six months. At the same time, the S&P 500 has returned 11%.
Is there a buying opportunity in Employers Holdings, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Do We Think Employers Holdings Will Underperform?
We’re sitting this one out for now. Here are three reasons we avoid EIG, plus one stock we’d rather own.
1. Net Premiums Earned Hit a Plateau
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 was flat over the last two years, much worse than the broader insurance industry. A silver lining is that policy underwriting outperformed its other business lines.
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 22.7% annually over the last five years while its revenue grew by 3.5%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
We see the value of companies helping consumers, but in the case of Employers Holdings, we’re out. That said, the stock currently trades at 1× forward P/B (or $49.49 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. Let us point you toward one of our all-time favorite software stocks.
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