Stewart Information Services trades at $70.27 and has moved in lockstep with the market. Its shares have returned 7.9% over the last six months while the S&P 500 has gained 11.3%.

Is there a buying opportunity in Stewart Information Services, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free for active Edge members.

Why Is Stewart Information Services Not Exciting?

We're cautious about Stewart Information Services. Here are three reasons why STC doesn't excite us and a stock we'd rather own.

1. Net Premiums Earned Point to Soft Demand

Insurers sell policies then use reinsurance (insurance for insurance companies) to protect themselves from large losses. Net premiums earned are therefore what's collected from selling policies less what’s paid to reinsurers as a risk mitigation tool.

Stewart Information Services’s net premiums earned has grown at a 2.9% annualized rate over the last five years, much worse than the broader insurance industry and slower than its total revenue.

2. EPS Trending Down

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sadly for Stewart Information Services, its EPS declined by 2.8% annually over the last five years while its revenue grew by 6.3%. This tells us the company became less profitable on a per-share basis as it expanded.

3. Substandard BVPS Growth Indicates Limited Asset Expansion

In the insurance industry, book value per share (BVPS) provides a clear picture of shareholder value, as it represents the total equity backing a company’s insurance operations and growth initiatives.

Although Stewart Information Services’s BVPS increased by 8.3% annually over the last five years, growth has recently decelerated to a sluggish 3.2% over the past two years (from $49.42 to $52.59 per share).

Final Judgment

Stewart Information Services isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 1.3× forward P/B (or $70.27 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We're fairly confident there are better investments elsewhere. We’d suggest looking at one of our top software and edge computing picks.

Stocks We Like More Than Stewart Information Services

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