Amerisafe (AMSF), a provider of Workers’ Comp Insurance focused on small- to mid-sized employers in hazardous industries, delivered strong fourth quarter results on February 27, driven by a big increase in net premiums earned. Earnings per share for the quarter beat the Zacks Consensus Estimate by 25%, prompting analysts to revise their estimates significantly higher for both 2013 and 2014. It is a Zacks Rank #1 (Strong Buy) stock. Although shares of Amerisafe have risen sharply since the fourth quarter beat, the valuation picture still looks reasonable, leaving the stock with plenty of room to run higher. Amerisafe delivered better-than-expected fourth quarter results on February 27. The company reported adjusted earnings per share of 49 cents, beating the Zacks Consensus Estimate by 10 cents. It was a whopping 53% increase over the same quarter in 2011. Special Offer: This special report zeroes in on some huge money-making opportunities as well as some urgent sell alerts that could save you from devastating losses in the year ahead. Get nearly 100 buy and sell calls from almost four dozen of the world’s most successful investing experts all in one place in Forbes’ Best Ideas for 2013. Net premiums earned jumped 19% year-over-year to $78.741 million while the pre-tax underwriting profit increased by 434% to $5.832 million. President and Chief Operating Officer Geoff Banta noted that AMSF “experienced another quarter of premium growth with stronger pricing, while maintaining [its] healthy policy retention levels. Additionally, [its] claims frequency for the 2012 accident year continued its downward trend and prior accident years developed favorably.” For the quarter, return on average equity was 9.8% while book value per share increased 9% to $20.88. Since AMSF reported its fourth quarter results back in late February, analysts have revised their estimates for both 2013 and 2014 significantly higher. This has sent the stock to a Zacks Rank #1 (Strong Buy). Over the last 60 days, the 2013 Zacks Consensus Estimate has jumped from $1.84 to $2.08. This represents growth of 40% over 2012 EPS. The 2014 consensus has risen from $2.10 to $2.38 over the same period, corresponding with 14% annual EPS growth. You can see this dramatic jump in the company’s ‘Price & Consensus’ chart: Although shares of Amerisafe have jumped more than 17% since the fourth quarter report, valuation still looks reasonable with shares trading at just 1.6x book value. The stock also trades at 16x 12-month forward earnings, which is a premium to its peers. But given its above-average growth prospects, this premium seems justified. With rapidly rising estimates, strong growth projects and reasonable valuation, AMSF offers investors attractive upside potential. Todd Bunton is the growth & income stock strategist for Zacks Investment Research and editor of the Income Plus Investor service.
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