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AXIS Capital (AXS) Up 11% in a Year: Will the Upside Continue?

Shares of AXIS Capital Holdings Limited AXS have rallied 11.4% in a year against the industry’s decrease of 9%, the Finance sector’s decline of 15.8% and the Zacks S&P 500 composite’s decline of 14.1% in the same time frame. With a market capitalization of $4.7 billion, the average volume of shares traded in the last three months was 0.6 million.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

AXS has a VGM Score of A. This helps to identify stocks with the most attractive value, growth and momentum.

The company’s focus on repositioning its portfolio and markets offering profitable growth, lower volatility, strong market presence, better pricing, margin expansion and effective capital deployment act as growth drivers. The Zacks Consensus Estimate for 2022 and 2023 earnings has moved 1% and 1.2% north, respectively in the past seven days, reflecting analysts’ optimism.  

Return on equity in the trailing 12 months was 11.8%, better than the industry average of 5.7%.

Can AXS Retain the Momentum?

The Zacks Consensus Estimate for 2022 earnings is pegged at $6.33, indicating an increase of 23.6% on 3.2% higher revenues of $5.4 billion. The consensus estimate for 2023 earnings is pegged at 6.77, indicating an increase of 7% on 6.7% higher revenues of $5.7 billion.

The long-term earnings growth rate is currently pegged at 5%. AXS has a Growth Score of B. This style score analyzes the growth prospects of a company.

AXIS Capital remains focused on growing its business lines that are likely to provide solid double-digit return on equity opportunities. The insurer is entering pet insurance, marine cargo, cyber and renewable energy insurance businesses.

Rate improvement, prudent underwriting and PML reductions supported by third-party capital are likely to fuel improved risk-adjusted return. This in turn should drive margin improvement.  

AXS has made investments in technology, in tandem with accelerated digitalization taking place in the insurance industry. Technological improvements help in effective usage of data, aid higher-value processes and activities, support new lines of business and enable efficient operations.

AXIS Capital expects disciplined pricing to persist in both insurance and reinsurance through 2023.

AXIS Capital eyes a low-90s combined ratio to fuel attractive ROE and has a $100 million share buyback program under its authorization to return value to shareholders.

AXS has been increasing dividends for the last 18 years. Its dividend has grown at a nine-year CAGR (2013 – 2021) of 5.9% and currently yields 3%, way above the industry average of 0.3%. This insurer boasts one of the highest dividend yields among its peers.

Interestingly, this Zacks Rank #2 (Buy) insurer is trading at a discount to the industry average. Price to book of 1.02X is lower than the industry average of 1.16X. Before valuation expands, it would be wise to take a position in the stock. Moreover, it has an impressive Value Score of A. Value Score helps find undervalued stocks. Back-tested results have shown that stocks with a favorable Value Score, when combined with a solid Zacks Rank, are the best investment bets.

Other Stocks to Consider

Some other top-ranked stocks from the property and casualty insurance industry are RLI Corp. RLI, W.R. Berkley Corporation WRB and HCI Group, Inc. HCI, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

RLI’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 45.89%. In the past year, RLI has increased 5.6%.

The Zacks Consensus Estimate for RLI’s 2022 earnings has moved 0.7% north in the past 30 days.

W.R. Berkley’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 27.08%. In the past year, W.R. Berkley's stock has increased 35%.

The Zacks Consensus Estimate for WRB’s 2022 and 2023 earnings has moved 6.5% and 5.1% north, respectively, in the past 60 days.

The Zacks Consensus Estimate for HCI Group’s 2022 and 2023 earnings has moved 33.3% and 40% north, respectively, in the past 60 days. In the past year, HCI Group stock has lost 33.4%.

The Zacks Consensus Estimate for HCI’s 2022 and 2023 earnings per share indicates year-over-year increases of 280.9% and 75%, respectively.


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Zacks Investment Research