UPDATE: J.P. Morgan Initiates Coverage on Essent as Compelling Investment Opportunity

In a report published Monday, J.P. Morgan analyst Richard Shane initiated coverage on

with an Overweight rating and $25.00 price target. In the report, J.P. Morgan noted, “We are initiating coverage of Essent Group, a new public company in the Private Mortgage Insurance sector, with an OW rating and $25 Dec 2014 price target. We view ESNT as a compelling investment based on the potential for predictable long-term growth and the opportunity to generate ROE in the mid to high teens. We believe that following five years of business development, Essent is at the inflection point for rapid earnings growth. We believe ESNT will be able to grow Insurance in Force from roughly $30B at CYE13 to approximately $100B by CYE18. This will lead to consistent revenue growth. We expect ESNT's expense ratio should decline from ~50% to ~20%. We note this will be partially offset as the loss expense ratio normalizes from essentially zero to 20-30%.” Essent closed on Friday at $22.00.