UPDATE: BofA Securities Downgrades Enact Holdings Inc (ACT) to Underperform
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BofA Securities analyst Mihir Bhatia downgraded Enact Holdings Inc (NASDAQ: ACT) from Neutral to Underperform with a price target of $25.00.
The analyst commented, "Year-to-date, all mortgage insurers have outperformed the S&P 500 (-10.3%), with ACT (+33.8%) leading the pack. Following the move, however, ACT’s valuation is at a premium to peers. ACT now trades at an 8x PE multiple to consensus 2023e EPS, a premium to other MIs trading closer to 7x. On a P/B (price/book) basis, ACT is now trading close to 1.1x P/B, a premium to MTG/RDN trading closer to BV (book value, see Exhibit 3). We continue to view the business model favorably, but we view valuation as extended. Our $25 PO, based on a 7.5x multiple to 2023e EPS, implies 11% downside and warrants an Underperform rating, in our view. We note that ACT pays a $0.14/share quarterly dividend and is likely to also announce a special dividend in 2H22."
Shares of Enact Holdings Inc closed at $27.66 yesterday.
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