ESSENT GROUP LTD. (ESNT): what the price requires

At today's price, ESSENT GROUP LTD. (ESNT) is priced for 9.8% return on equity. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/ESNT

Headline

FieldValue
TickerESNT
CompanyESSENT GROUP LTD.
Current price$65.11/sh
CompositionMortgage Insurance 92% / Reinsurance 8%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisfinancials
Return on equity needed9.8%
Return on equity now12.0%
ROE gap-2.2pp
Price-to-book1.05x

Solve inputs: computed at a 9.5% cost of equity with 4% terminal growth over a 5-year stage, on common book equity (FY2026); each 1pp of cost of equity moves the implied ROE ~1.1pp.

How unusual the bet is: within-range

ReferenceValue
vs own history-1.20σ
cohort percentile (of 80 peers)18
sustained it ~10 years at this level77%
implied end-window share0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset0.73x3justifies
Earnings0.82x2justifies
Relative0.80x3justifies
Growth1.48x1expensive

Families that justify the price: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.9%); the inversion above states its own rate.

Per-Model Detail (n=9)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth——no—
Bank Fair Value (P/TBV)—$99.900.65xyesTBVPS $60.23 × 1.66x (ROE (TTM) 12.0% / CoE 9.3%, g=5.0% (sustainable: 65% retention × ROE, 5% cap; not the terminal-growth assumption))
Relative ValuationRelative$80.960.80xyesP/E 11x (static sector reference · 2026-04), scenarios: 9.3x / 11.0x / 12.7x (bear / base = reference held flat / bull), EV/EBITDA 22x
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$78.460.83xyesBV/sh $60.23, ROE (TTM) 12.0%, ke 9.3%
Two-Stage Excess ReturnAsset$89.000.73xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$43.991.48xyesRev $1.3B, growth 1% (input: historical growth; tapered), Terminal P/S: 4.1x / 4.8x / 5.6x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$84.360.77xyesEPS $7.03, growth 3% (input: historical EPS growth), PEG=3.20 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings——no—
Residual IncomeAsset——no—
Graham NumberAsset$97.610.67xyes√(22.5 × EPS $7.03 × BVPS $60.23) — Graham's conservative floor
EV/EBITDA RelativeRelative——no—
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$83.100.78xyesEPS $7.03 × (8.5 + 2×2.8%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative——no—
PEG Fair ValueRelative$35.151.85xyesEPS $7.03 × (PEG 1.5 × growth 2.8% (input: historical EPS growth)) → PE 4.2x
Earnings YieldEarnings$76.000.86xyesEPS $7.03 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

FieldValue
Share count CAGR (buyback)-3.4%

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

Bull Case

Look at where the price sits against the methods and the read is plainly favorable. The asset-value, earnings-power, and relative-multiple lenses all land above the current price, with only the growth lens looking demanding. Translated to the metric a mortgage insurer is actually judged on, Essent trades at about 0.95 times book value, below the $61.20 of book value per share it reported, while earning a 12.0% return on equity in the quarter on an annualized basis. Buying a profitable financial below book is the textbook value setup, and the methods agree the price understates what the balance sheet and earnings power support.

The franchise generating that return is a well-capitalized, conservatively run mortgage insurer. Essent had $247.9 billion of insurance in force at quarter-end, up 1% year over year, with persistency at a high 84.7%. Persistency matters more than new business in the current environment: as the filing explains, "if interest rates rise, persistency is likely to increase, which may extend the average life of our insured policies." Higher-rate mortgages stay on the books longer, which means the premium stream from the existing in-force pool keeps earning rather than running off. The company also carries substantial reinsurance and is held to the GSEs' capital standards, so the book is both protected and disciplined.

Capital strength and returns are the closing argument. Shareholders' equity stood at $5.7 billion against $6.6 billion of total cash and investments, and the company returned capital aggressively, $214 million of buybacks year to date and a $0.35 quarterly dividend, shrinking the share count at a roughly 3.4% annual pace. Repurchasing stock below book value is directly accretive to book value per share, so each buyback at this price compounds the per-share value the methods already say is underpriced. Essent is also expanding into property-and-casualty reinsurance, a measured use of its excess capital. For an investor, the bull case is a below-book, 12%-return financial with a long-tail premium stream and management retiring shares at a discount to their own stated worth.

Bear Case

Essent competes in a narrow field where the rivals are well-capitalized and the product is close to a commodity. Private mortgage insurance is dominated by a handful of players, MGIC, Radian, and NMI among them, all selling essentially the same coverage on loans the government-sponsored enterprises require it on. The 10-K is explicit that the GSEs control the terms of the game: their "underwriting standards that determine what loans are eligible for purchase by the GSEs ... can affect the volume and quality of the risk insured." When the product is interchangeable and the rules are set by an outside party, pricing discipline can break down. A price war among the mortgage insurers, the kind the industry has seen before, would compress the returns that justify even today's below-book valuation, and no single competitor's restraint can be counted on.

The deeper risk is that Essent's earnings are a bet on the housing and credit cycle staying benign. Mortgage insurance pays claims when borrowers default and home values fall below the loan balance, so the business prints strong returns during good times and absorbs losses in a downturn. The company sets reserves only when it receives "notices of default on insured mortgage loans," and it acknowledges its reserving method "does not account for the impact of future losses that could occur" from loans not yet in default. That is the structural feature of the model: the favorable 12% return reflects a period of low defaults and rising home prices, and a recession with rising unemployment and falling home values would push claims higher and the return lower. The price is paying a below-book multiple precisely because the market discounts that cyclicality.

The same persistency that helps the premium stream is double-edged. High persistency exists because elevated mortgage rates discourage refinancing, which keeps higher-rate, and often higher-risk, loans on the books longer. If those borrowers are stretched, the extended policy life means extended risk exposure, not just extended premium. New insurance written depends on mortgage origination volume, which is suppressed when rates are high, so the growth lever is constrained at the same time the in-force book ages. Essent is genuinely well-capitalized, so this is not a solvency bear, the regulatory capital and reinsurance protections are real. It is a cyclicality-and-competition bear: a commodity financial product whose returns are a function of a credit cycle that has been kind, priced below book because the market is reserving judgment on how those returns hold up when the cycle turns.

Valuation

For a financial the right lens is return on equity against the price-to-book it commands, and Essent screens cheap on both. The stock trades at about 0.95 times book value, below its $61.20 of book value per share, while earning a 12.0% annualized return on equity in the quarter against a roughly 14% return through its own recent history. What the price assumes, in plain terms, is that the return on equity does not hold above the cost of capital; if it does, a sub-book multiple on a double-digit-return financial is hard to justify. The price is paying for erosion, not continuation.

The methods reinforce the value read. Asset value, earnings power, and peer multiples all price Essent above its current quote, and only the forward-growth lens looks demanding, which makes sense because new insurance written is constrained by suppressed mortgage origination in a high-rate environment. The relevant comparison is to the other public mortgage insurers, the cohort Essent sits in, and against that group its below-book multiple and 12% return are competitive. The market's discount is the cyclicality premium: it prices the stock below book because mortgage-insurance returns are credit-cycle dependent, and the methods that mark the in-place capital and earnings say the discount is generous.

Solvency for a mortgage insurer is read as regulatory capital and claims-paying capacity, not as corporate leverage, because the balance sheet is funded by premiums and reserves rather than debt. Essent holds $5.7 billion of shareholders' equity against $6.6 billion of total cash and investments, and it operates under the GSEs' capital standards with substantial reinsurance, so the capital cushion is strong. The decisive feature is the capital-return mechanics: buying back stock at 0.95 times book is directly accretive to book value per share, so the $214 million of year-to-date repurchases compounds the value the methods already flag as underpriced. The price rests on the return on equity staying near its level through the cycle, and at a below-book multiple the downside is largely priced while the buyback quietly grows the per-share book underneath it.

Catalysts

The Q1 2026 report, released in early May, was the central recent catalyst and it confirmed the steady, capital-return-driven story. Net income was $171.8 million, or $1.82 per diluted share, with an annualized return on equity of 12.0% and book value per share up 11% year over year to $61.20. Total revenue was $336 million, split between net premiums earned of $260.1 million and net investment income of $59 (June 27, 2026).3 million. The earnings beat expectations, and the headline metric for the thesis, book value per share growing while the stock trades below it, moved the right way.

Capital return and portfolio metrics were the substance. The company repurchased $214 million of stock year to date and declared a $0.35 quarterly dividend, with shareholders' equity at $5.7 billion against $6.6 billion of total cash and investments. Insurance in force grew 1% to $247.9 billion and persistency held high at 84.7%, the elevated-rate environment keeping existing policies on the books. The company also began reinsuring property-and-casualty risks in 2026, a measured deployment of excess capital into an adjacent line.

Into the coming quarters, the figures to watch are credit performance, default notices and loss development are the leading indicators of a turn in the cycle, the persistency and new-insurance-written trend as mortgage rates move, and the pace of buybacks, which compound book value per share while the stock sits below book. The broader housing market and unemployment are the macro drivers that determine whether the 12% return holds. Continued capital return at a discount to book and stable credit would reinforce the value case.

Peer Cohorts (Per Segment, With Filing Citations)

Mortgage Insurance (reported)

Reinsurance (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q1 2026 earnings release

View the full interactive ESNT report on boothcheck