With EPS Growth And More, Enact Holdings (NASDAQ:ACT) Makes An Interesting Case

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It's common for many investors, especially those who are inexperienced, to buy shares in companies with a good story even if these companies are loss-making. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. A loss-making company is yet to prove itself with profit, and eventually the inflow of external capital may dry up.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Enact Holdings (NASDAQ:ACT). While this doesn't necessarily speak to whether it's undervalued, the profitability of the business is enough to warrant some appreciation - especially if its growing.

View our latest analysis for Enact Holdings

Enact Holdings' Earnings Per Share Are Growing

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That means EPS growth is considered a real positive by most successful long-term investors. Enact Holdings managed to grow EPS by 14% per year, over three years. That growth rate is fairly good, assuming the company can keep it up.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. Enact Holdings maintained stable EBIT margins over the last year, all while growing revenue 5.5% to US$1.2b. That's a real positive.

You can take a look at the company's revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

earnings-and-revenue-history
NasdaqGS:ACT Earnings and Revenue History November 8th 2024

Fortunately, we've got access to analyst forecasts of Enact Holdings' future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Enact Holdings Insiders Aligned With All Shareholders?

Investors are always searching for a vote of confidence in the companies they hold and insider buying is one of the key indicators for optimism on the market. Because often, the purchase of stock is a sign that the buyer views it as undervalued. Of course, we can never be sure what insiders are thinking, we can only judge their actions.

The first bit of good news is that no Enact Holdings insiders reported share sales in the last twelve months. But the important part is that President Rohit Gupta spent US$270k buying stock, at an average price of US$26.97. It seems at least one insider thinks that the company is doing well - and they are backing that view with cash.