Trisura Group Ltd. (TSX:TSU) is an “attractive opportunity for small-cap investors looking for a high-growth story,” says one analyst
Capital Ideas Media | April 16, 2021 | SmallCapPower: Given the nerve-wracking stock market volatility we’ve experience recently, we think our subscribers deserve an investment idea that has shown resilience during these trying times.
(Originally published on Capital Ideas Media on March 9, 2021)
Trisura Group Ltd. (TSX:TSU), which was spun off from Brookfield Asset Management in 2017, is an international provider of specialty insurance, with a long track record of industry-leading underwriting profitability in Canada and a rapidly-expanding U.S. fronting fee business.
Not exactly an exciting business, for sure, but with a 2020 Return on Equity (ROE) that was higher than most of its peers at 13.5%, Stifel Nicolaus Canada analysts declared that Trisura is “firing on all cylinders” after the Company recently reported Q4 earnings per share of $1.05, handily beating the consensus estimate of $0.71. Revenue during 2020 also rose 56% to $146 million.
Driving these results was strength in its Canadian business, accelerating profitability in its U.S. operations, and improved asset-liability matching in its reinsurance operations.
“We continue to view Trisura as an attractive opportunity for small-cap investors looking for a high-growth story,” Scotia analyst Phil Hardie wrote in a recent note to clients.
“Despite the solid run, we continue to see a number of catalysts over the near-to-mid-term. The primary catalyst over the coming 12 months will likely be driven by increased U.S. earnings expectations. With continued top-line momentum, this could be accelerated through increased underwriting capacity of the platform through an equity raise, providing upside to our target.”
As well, Trisura’s investment portfolio, consisting primarily of high-quality, investment-grade bonds and dividend-paying equities, defied the March 2020 market volatility, increasing more than 28% for the year.
Trisura’s stock price, meanwhile, has appreciated about 450% since it began trading in mid-2017 and has held up well during the recent stock-market selloff.
Finally, Trisura Group’s share price performance has benefitted from the Company’s tight capital structure of a little more than 10 million shares outstanding, approximately 6% of which are owned by Trisura senior management.
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