Does Essent Group’s 27% Rally in 2025 Still Leave Room for Upside?

• If you are wondering whether Essent Group is still a smart buy after its strong run, you are not alone. This piece will walk through what the current share price really implies about value.
• The stock has climbed 2.9% over the last week, 8.5% over the past month, and is now up 27.0% over the last year, building on an impressive 80.9% gain over three years and 66.6% over five years.
• Investors have been responding to a steady stream of positive housing and mortgage market data, which has reinforced confidence in Essent Group's role as a mortgage insurer. At the same time, regulatory and macro updates around credit quality and capital standards have shaped how the market is pricing both its growth prospects and risk profile.
• On our checks, Essent Group scores a solid 5 out of 6 for valuation, suggesting it screens as undervalued on most metrics. Next we will unpack those different approaches, before finishing with a more holistic way to think about what the stock is truly worth.

Essent Group delivered 27.0% returns over the last year. See how this stacks up to the rest of the Diversified Financial industry.

Approach 1: Essent Group Excess Returns Analysis

The Excess Returns model looks at how much value Essent Group can create above the return that shareholders require, then adds that stream of value to the company’s book value. Instead of focusing on short term earnings swings, it emphasizes the long run relationship between profitability, growth, and the cost of equity.

Essent Group starts with a solid Book Value base of $58.86 per share and a Stable EPS of $7.89 per share, based on weighted future Return on Equity estimates from 5 analysts. With an Average Return on Equity of 11.81% versus a Cost of Equity of $5.00 per share, the model estimates an Excess Return of $2.89 per share, suggesting the business is expected to earn comfortably more than its equity investors demand. That earning power is supported by a Stable Book Value forecast of $66.84 per share from 3 analysts.

Combining these inputs, the Excess Returns valuation points to an intrinsic value of about $135.48 per share, implying Essent Group is roughly 51.1% undervalued versus its current share price.

Result: UNDERVALUED

Our Excess Returns analysis suggests Essent Group is undervalued by 51.1%. Track this in your watchlist or portfolio, or discover 914 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Essent Group.

Approach 2: Essent Group Price vs Earnings

For a consistently profitable business like Essent Group, the price to earnings ratio is a useful way to judge whether investors are paying a reasonable price for each dollar of current earnings. The higher the expected growth and the lower the perceived risk, the higher a normal or fair PE ratio tends to be, as investors are willing to pay more today for stronger and more reliable future profits.

Essent Group currently trades on a PE of 9.11x, which is below both the Diversified Financial industry average of about 13.71x and the broader peer group average of 26.29x. Simply Wall St also calculates a Fair Ratio of 11.80x, its proprietary view of what Essent Group’s PE should be once you factor in its earnings growth profile, profitability, risk characteristics, industry positioning and market cap.

This Fair Ratio is more informative than a simple comparison with peers or the sector, because it adjusts for company specific strengths and weaknesses instead of assuming every firm in the group deserves the same multiple. With Essent Group’s actual PE sitting meaningfully below the 11.80x Fair Ratio, the multiple based view also points to the shares being undervalued at current levels.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Essent Group Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, a simple tool on Simply Wall St’s Community page that lets you connect your view of Essent Group’s story. For example, you might see it either as a steadily compounding mortgage insurer with resilient margins and buyback support that justifies a fair value closer to the most bullish target of about $71, or as a business facing housing, regulatory, and competitive headwinds that could cap growth and warrant a fair value nearer the most cautious target of about $59. You can then translate that story into your own revenue, margin, and earnings forecasts, automatically compare your resulting fair value to today’s share price to see whether it looks like a buy, hold, or sell, and have that view update dynamically as new earnings, news, and forecasts come in so your decision making stays anchored to both numbers and narrative rather than static ratios alone.

Do you think there's more to the story for Essent Group? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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