NEW YORK (
) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.
Highlights from the ratings report include:
- The revenue growth came in higher than the industry average of 7.0%. Since the same quarter one year prior, revenues slightly increased by 7.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- EMCI's debt-to-equity ratio is very low at 0.13 and is currently below that of the industry average, implying that there has been very successful management of debt levels.
- EMC INSURANCE GROUP INC's earnings per share declined by 13.3% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past two years. However, we anticipate this trend to reverse over the coming year. During the past fiscal year, EMC INSURANCE GROUP INC swung to a loss, reporting -$0.16 versus $2.40 in the prior year. This year, the market expects an improvement in earnings ($1.15 versus -$0.16).
- The change in net income from the same quarter one year ago has exceeded that of the Insurance industry average, but is less than that of the S&P 500. The net income has decreased by 13.1% when compared to the same quarter one year ago, dropping from $10.71 million to $9.31 million.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, EMCI has underperformed the S&P 500 Index, declining 9.67% from its price level of one year ago. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
EMC Insurance Group Inc., through its subsidiaries, provides property and casualty insurance, and reinsurance products in the United States. The company operates through two segments, Property and Casualty Insurance, and Reinsurance. EMC Insurance Group has a market cap of $282.5 million and is part of the
industry. Shares are up 11.8% year to date as of the close of trading on Wednesday.
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-- Written by a member of TheStreet RatingsStaff