Kinsale Capital is the IBD Stock Of The Day for Wednesday. The Virginia-based insurance firm is nearing a buy point ahead of its earnings report next week. KNSL stock hit a 52-week high on Tuesday.
Kinsale Capital focuses on excess and surplus (E&S) insurance. This type of specialty insurance covers higher-risk businesses, exposures and policies that traditional insurance doesn't cover.
The firm has performed well over the past two years. Kinsale posted strong earnings and revenue growth since Q2 of 2020. However, revenue gains slowed to 17% from 30% last quarter and earnings growth ticked up to 50% from 47%.
There's been more favorable assumptions around insurance premium growth and expenses, according to a research note from Truist analyst Mark Hughes. Meanwhile, Kinsale has a favorable competitive environment as its rivals struggle with rising losses and deteriorating revenues, he wrote.
For the third-quarter results on Oct. 27, analysts expect Kinsale's earnings to fall roughly 19% to $1.28 per share, according to the FactSet consensus. Revenue is seen rising 30% to $216 million.
Buying stocks before earnings results can be risky. Results that miss analyst forecasts could cause unexpected price swings. In addition, investors should be building watchlists, rather than buying into new positions, until the stock market confirms a new uptrend.
KNSL Stock
KNSL stock is trading in a cup base with a 285.36 buy point, according to MarketSmith. Shares briefly eclipsed the buy point on Tuesday after hitting a 52-week high of $285.66, but have since pulled back. Ideally, KNSL would forge a handle just below the buy point.
The pattern is a base-on-base configuration, which tends to show stocks anxious to move higher. Kinsale's base formed with firm support at its 10-week moving average.
KNSL stock ranks first in terms of group leadership for the Insurance-Property & Casualty industry group, according to IBD Stock Checkup.
The stock's relative strength line is near highs, meaning KNSL is squarely outperforming the S&P 500. A muscular RS Rating of 98 indicates the stock is outperforming 98% of the stocks in IBD's database.
The company's consistently strong results earned it a perfect EPS Rating of 99. And KNSL stock has a 97 Composite Rating out of a possible 99, which combines various fundamental and technical indicators into one easy-to-read score.
KNSL stock slid more than 2% during market trading Wednesday, but shares are up more than 16% year to date.
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