Compass Point Upgrades AmTrust Financial (AFSI) to Buy

Compass Point upgraded AmTrust Financial (NASDAQ: AFSI) from Neutral to Buy with a price target of $49.00 (from $37.00).

Analyst Ken Billingsley comments, "We are raising our rating on AFSI as we remain confident that management will continue to take advantage of opportunities to grow its business both organically and through acquisitions in both the fee based and underwriting segments. While some look at AFSI as a buyer of distressed assets, management qualifies this to say they are looking for motivated sellers in which there are not many bidders. AFSI has been very opportunistic, and a market in which premium rates may be peaking and economic growth remains anemic we would expect AFSI to continue to find attractive candidates. The ACP Re merger with Tower Group International (TWGP - Neutral, $3 PT) is a prime example of AFSI taking advantages of opportunities. Fee income will grow in addition to new underwriting business following the proposed merger (expected to close in the summer of 2014). While AFSI shares trade at a premium to its peers, the company also generates an ROATE that far exceeds its peers. Estimated revenues for 2014 have a mix of fee income (46%), underwriting income (41%), and investment income (13%). Our $49 price target has the company trading at 3.2x our 2015E diluted TBVPS of $15.32 with an ROATE of 35.8%, and this represents a P/E ratio of 10.1x which we believe is low for a company who generates a significant amount of revenues from its fee based business."

For an analyst ratings summary and ratings history on AmTrust Financial click here. For more ratings news on AmTrust Financial click here.

Shares of AmTrust Financial closed at $41.91 yesterday.

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