What Happened?
Shares of title insurance provider Stewart Information Services (NYSE: STC) fell 4.1% in the afternoon session after the company reported third-quarter results that beat analyst expectations, as investors appeared to look past the headline numbers and focus on weaker long-term trends. The title insurance provider posted revenue of $776.5 million, up 16.3% year-on-year and significantly ahead of Wall Street's estimates. Its earnings per share also increased to $1.55 from $1.07 in the same quarter last year. However, despite the strong quarter, the company's longer-term performance likely gave investors pause. Over the last five years, Stewart's revenue growth has been described as mediocre, and its earnings per share have declined annually during that period. Furthermore, the company's book value per share growth, a key metric for insurers, has decelerated in the last two years. This suggests the solid quarterly performance was not enough to outweigh concerns about the underlying health and long-term trajectory of the business, prompting a sell-off.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Stewart Information Services? Access our full analysis report here.
What Is The Market Telling Us
Stewart Information Services’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 2 months ago when the stock gained 4.2% on the news that the major indices rebounded, as Fed Chair Jerome Powell delivered dovish remarks at the much-awaited Jackson Hole symposium. Powell suggested that with inflation risks moderating and unemployment remaining low, the Federal Reserve might consider a shift in its monetary policy stance, including potential interest rate cuts. This outlook eased market concerns about prolonged high interest rates and their impact on economic growth. The prospect of lower borrowing costs bolstered investor confidence, particularly in sectors that have lagged, leading to a broad rally across the market.
Stewart Information Services is up 11% since the beginning of the year, and at $73.08 per share, it is trading close to its 52-week high of $77.18 from December 2024. Investors who bought $1,000 worth of Stewart Information Services’s shares 5 years ago would now be looking at an investment worth $1,637.
Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.
