Amerisafe (AMSF) Down 21.9% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Amerisafe (AMSF). Shares have lost about 21.9% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Amerisafe due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Amerisafe Earnings Beat Estimates in Q4, Soar Y/Y

Amerisafe fourth-quarter 2019 earnings of $1.70 per share beat the Zacks Consensus Estimate by 123.7%. Also, the bottom line improved 58.9% year over year. The upside can be attributed to a decline in expenses incurred related to loss and loss adjustment, underwriting and other operating costs, and policyholder dividends.

Quarter in Detail

Amerisafe’s operating revenues decreased 4.5% from the prior-year quarter to $90.4 million and met the Zacks Consensus Estimate. The downside was due to a decline in net premiums earned and lower net investment income.

Gross premiums written were down 6.1% year over year to $70.7 million primarily due to a consistent reduction in approved loss costs in the company’s states of operation. Underwriting profit of $33.3 million increased 96.3% year over year.

Net investment income declined 0.3% year over year to nearly $8 million due to a marginally smaller investment portfolio.

Total expenses were nearly $49 million, down 31.8% from the year-ago quarter due to lower loss and loss adjustments expenses incurred, underwriting and other operating costs, and expenses related to policyholder dividends.

Net combined ratio of 59.6% improved 2140 basis points year over year.

Dividend Hike

Concurrent with the earnings release, Amerisafe’s board of directors hiked its quarterly dividend by 8% to 27 cents per share, up from the prior dividend payout of 25 cents per share.

The dividend will be paid out on Mar 27, 2020, to shareholders of record as of Mar 13, 2020.

Financial Update (Dec 31, 2019)

Amerisafe exited the quarter with cash and cash equivalents of $43.8 million, up 8.6% from the prior year-end level. Shareholders’ equity was $430.2 million, up 5% year over year. Operating return on average adjusted equity was 30%, up 1100 points year over year.

For 2019, total revenues were $370.4 million, down 2% from 2018-end level. Earnings of $4.60 per share improved 19.2% from the 2018-end level.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review.

VGM Scores

Currently, Amerisafe has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Amerisafe has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.