3 Reasons to Avoid ORI and 1 Stock to Buy Instead

Old Republic International’s 11.8% return over the past six months has outpaced the S&P 500 by 5.8%, and its stock price has climbed to $42.54 per share. This run-up might have investors contemplating their next move.

Is now the time to buy Old Republic International, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Is Old Republic International Not Exciting?

Despite the momentum, we don't have much confidence in Old Republic International. Here are three reasons there are better opportunities than ORI and a stock we'd rather own.

1. Net Premiums Earned Point to Soft Demand

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore gross premiums less what’s ceded to reinsurers as a risk mitigation and transfer strategy.

Old Republic International’s net premiums earned has grown at a 4.4% annualized rate over the last five years, worse than the broader insurance industry and in line with its total revenue.

2. EPS Barely Growing

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Old Republic International’s EPS grew at an unimpressive 6.9% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 4.6% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

3. Substandard BVPS Growth Indicates Limited Asset Expansion

Book value per share (BVPS) serves as a key indicator of an insurer’s financial stability, reflecting a company’s ability to maintain adequate capital levels and meet its long-term obligations to policyholders.

Old Republic International’s BVPS increased by a meager 3% annually over the last five years, and its recent performance paints an even worse picture as growth has decelerated a bit to a weak 1.5% over the past two years (from $23.36 to $24.08 per share).

Final Judgment

Old Republic International’s business quality ultimately falls short of our standards. With its shares outperforming the market lately, the stock trades at 1.7× forward P/B (or $42.54 per share). At this valuation, there’s a lot of good news priced in - you can find more timely opportunities elsewhere. We’d recommend looking at a safe-and-steady industrials business benefiting from an upgrade cycle.

Stocks We Would Buy Instead of Old Republic International

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