STC

We rate STEWART INFORMATION SERVICES CORP (STC) as Avoid with a composite score of 38.9/100 at a current price of $67.49. The stock falls in the bottom quintile of our universe across key quantitative factors, and the multi-factor weakness suggests a high probability of continued underperformance.

The rating is primarily driven by strength in stability (56th percentile) and value (50th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (28th percentile) and momentum (28th percentile) tempers our overall conviction. We assign a Narrow Moat rating (50/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; sustainability of the current growth rate. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

STEWART INFORMATION SERVICES CORP holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 38.9/100 places it at rank #3682 in our full 7,333-stock universe. At $2.1B in market capitalization, STEWART INFORMATION SERVICES CORP is a mid-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 32%, though momentum at the 28th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 0% (-76.5pp vs sector) narrow to operating margins of 5% (-11.6pp vs sector) and net margins of 4.2%, yielding a gross-to-net conversion rate of N/A%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $67.49, STEWART INFORMATION SERVICES CORP is trading near fair value based on current fundamentals. Our value factor score of 50/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 16.7x (a 40% premium to the sector median of 11.9x), EV/EBITDA of 9.4x (at a premium), P/B of 1.4x, P/S of 0.7x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Medium uncertainty rating to STEWART INFORMATION SERVICES CORP. The stock presents a balanced risk profile: weak quality scores (28th percentile) and low beta of 0.59 — while defensive, this may indicate limited upside participation in bull markets. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: weak quality scores (28th percentile); low beta of 0.59 — while defensive, this may indicate limited upside participation in bull markets; the combination of leverage (92% D/E) and thin margins (4.2% net) amplifies downside risk. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 56th percentile and quality factor at the 28th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: a 2.76% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate STEWART INFORMATION SERVICES CORP's capital allocation as Poor. Key concerns include suboptimal returns on capital. Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — STEWART INFORMATION SERVICES CORP significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, STEWART INFORMATION SERVICES CORP receives a Avoid rating with a composite score of 38.9/100 (rank #3682 of 7,333). Our quantitative framework assigns a Narrow Moat (50/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 40/100.

Our analysis does not support a constructive view on STEWART INFORMATION SERVICES CORP at this time. The combination of the current quantitative profile, medium uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.