Kinsale Capital Lags Industry, Loses 8% YTD: How to Play the Stock

Core Insights - Kinsale Capital (KNSL) shares have declined by 8.2% year to date, underperforming its industry, sector, and the Zacks S&P 500 composite [1] - The stock is trading significantly below its 52-week high and below the 50-day moving average, indicating a bearish trend [1] Financial Performance - Kinsale Capital has a market capitalization of $10 billion, with an average trading volume of 0.2 million shares over the last three months [5] - The Zacks Consensus Estimate for 2025 earnings is$ 17.49, reflecting an 8.9% year-over-year increase, with revenues projected to rise by 13.3% to $1.8 billion [6] - For 2026, the earnings estimate is$ 20.91, indicating a 19.6% year-over-year increase on 14.4% higher revenues of $2.1 billion [6] - The company has a Growth Score of B, with an expected long-term earnings growth rate of 15%, surpassing the industry average of 7.9% [6] Market Position and Strategy - Kinsale Capital is well-positioned in the excess and surplus (E&S) market in the U.S., benefiting from high retention rates from contract renewals [9] - The E&S market has shown significant growth and better underwriting results compared to the broader property and casualty (P&C) industry [9] - The company targets small to medium-sized accounts, aiming for low double-digit rate increases across its business [10] Operational Efficiency - Kinsale Capital has been improving its margins and maintaining lower loss ratios, targeting a combined ratio in the mid-80s range over the long term [10] - The company utilizes a proprietary technology platform to enhance its expense ratio and operational efficiency [11] - Free cash flow conversion has remained above 85% over recent quarters, indicating solid earnings [12] Return Metrics - The return on equity (ROE) for Kinsale Capital is 28%, significantly higher than the industry average of 7.6% [13] - The return on invested capital (ROIC) for the trailing 12 months is 24.1%, compared to the industry's 5.8% [14] Valuation and Analyst Outlook - KNSL shares are trading at a premium, with a price-to-book ratio of 6.72X, compared to the industry average of 1.65X [4] - The average price target from nine analysts is$ 477.78 per share, suggesting an 11.6% potential upside from the last closing price [15] Growth and Shareholder Returns - Kinsale Capital has a strong dividend history, with a seven-year compound annual growth rate (CAGR) of 12.1% from 2017 to 2024 [17] - The board of directors has authorized a share repurchase program of up to $100 million of common stock [17]