Enact (NASDAQ:ACT) shares closed higher on Monday after Bank of America Securities (BofA) upgraded the mortgage insurer to Neutral from Underperform and raised its price target to $27.00 from $25.00.
BofA analyst, Derek Harris, cited an improved outlook for the mortgage insurance industry, noting that Enact’s risk-to-reward profile had improved significantly over the past several quarters. Additionally, Harris believes that Enact’s earnings are poised to benefit from higher mortgage origination volumes and improved profitability in the company’s core business.
Harris also pointed out that Enact’s stock is currently trading at a discount to its peers, providing investors with an attractive entry point. He believes that the company’s improving fundamentals and attractive valuation could lead to a re-rating of the stock in the future.
Enact’s management team has been working to improve the company’s financial performance and competitiveness in recent years. In 2020, the company rebranded itself from Genworth Mortgage Insurance to Enact and has since focused on improving its underwriting capabilities and expanding its distribution network.
Enact’s efforts have paid off, with the company reporting strong financial results in the first quarter of 2021. The company’s net income more than doubled to $147 million, up from $63 million in the same period last year. Additionally, Enact’s new insurance written (NIW) increased by 40% year-over-year to $16.7 billion, driven by strong demand for mortgage insurance.
Enact CEO, James O’Sullivan, commented on the company’s Q1 results, stating, “We are off to a great start in 2021, and our first quarter results demonstrate the strength of our franchise and our team’s ability to execute in a challenging environment.”
Looking ahead, Enact’s management team is optimistic about the company’s prospects for growth. The company expects to benefit from increased demand for mortgage insurance as the housing market continues to rebound. Additionally, Enact plans to expand its product offerings and enhance its underwriting capabilities to better serve its customers.
Enact’s stock has performed well over the past year, gaining over 45% since its IPO in July 2020. However, the stock has struggled to gain momentum in recent months, trading sideways since the start of the year.
With BofA’s upgrade, Enact’s stock could see renewed interest from investors. The company’s improving financial performance and attractive valuation make it an appealing investment opportunity, especially in a market where mortgage origination volumes are expected to remain strong.
In summary, Enact’s shares gained over 2% on Monday after BofA Securities upgraded the company to Neutral from Underperform and raised its price target. The upgrade was based on an improved outlook for the mortgage insurance industry and Enact’s improving fundamentals. With the company’s strong financial performance and optimistic growth prospects, Enact’s stock could be a good investment opportunity for long-term investors.