KNSL Trading at a Premium to Industry: How Should You Play the Stock?

Core Insights - Kinsale Capital Group, Inc. (KNSL) shares are trading at a premium compared to the Zacks Property and Casualty Insurance industry, with a price-to-book value of 6.47X, significantly higher than the industry average of 1.52X and the Finance sector's 4.11X [1] - Kinsale Capital's stock has gained 14.3% over the past year, underperforming its industry growth of 21.8% and the Finance sector's growth of 17.1%, but outperforming the S&P 500 composite's return of 10.9% [2][3] - The company has a market capitalization of $10.23 billion, with a recent closing price of $438.99, which is below its 52-week high of $531.79 [4] Financial Performance - The Zacks Consensus Estimate for Kinsale Capital's 2025 earnings per share indicates a year-over-year increase of 10%, with revenues expected to reach $1.75 billion, reflecting a 10.2% improvement [8] - Earnings have grown 44.3% over the past five years, outperforming the industry average of 18.9%, with a long-term earnings growth rate expected at 15%, compared to the industry average of 6.9% [9] - Kinsale Capital has consistently surpassed earnings estimates in the last four quarters, with an average surprise of 11.07% [10] Efficiency and Returns - Kinsale Capital's return on equity (ROE) stands at 26.3%, significantly higher than the industry's 7.7%, indicating effective utilization of shareholders' funds [11] - The return on invested capital (ROIC) is 22.7%, also outperforming the industry's 5.9%, reflecting the company's efficiency in generating income [12] Market Position and Strategy - Kinsale Capital has a strong presence in the excess and surplus (E&S) market in the U.S., benefiting from high retention rates and improved premiums due to significant market growth [13] - The company targets small to medium-sized accounts, achieving better pricing and lower competition, with management estimating low double-digit rate increases across its business [15] - Kinsale Capital aims for a combined ratio in the mid-80s range over the long term, indicating a focus on maintaining profitability [15] Technological Edge and Investment Income - The company leverages a proprietary technology platform to enhance operational efficiency and scalability, driving profitability [16] - Despite a low-interest rate environment, Kinsale Capital's investment income is expected to benefit from the investment of excess operating funds, with free cash flow conversion remaining above 85% [17] Dividend and Share Repurchase - Kinsale Capital has a strong dividend history, increasing dividends since 2017 at a seven-year CAGR of 12.1%, supported by operational excellence [19] - The board of directors has authorized a share repurchase program of up to $100 million of common stock, indicating confidence in the company's financial position [19]