William Blair Cautious On North American P&C Insurance Market, Moves To Sidelines On Sapiens International

Sapiens International Corporation N.V. SPNS, an Israeli software solutions provider for the insurance industry, reported Monday before the market open with first-quarter results that showed non-GAAP earnings per share of 13 cents, ahead of the 10-cent consensus. Revenue of $71 million also exceeded expectations. The company maintained its full-year guidance.

The Analyst

William Blair analyst Justin Furby downgraded Sapiens from Outperform to Market Perform.

The Thesis

Sapiens' Q1 print and commentary on the the pipeline for recently acquired Adaptik were encouraging, but near-to-medium concerns exist on whether Sapiens can boost organic growth in its North American property and casualty business, Furby said in a Tuesday note. 

With the company's life insurance business on a slight decline and pipelines remaining soft, the North American P&C business is key to Sapiens' growth, the analyst said.

"We are taking a more cautious approach and waiting for additional proof points that management's strategy within the North American P&C market is working." 

The Street estimates for Sapiens in 2019 could be "a bit too aggressive," Furby said. 

William Blair attributed the top-line Q1 beat to better-than-expected top-line integration of the Adaptik acquisition, which was completed March 5, and earlier-than-expected revenue from some DECISION deals.

Sapiens shares trade at 16.6 times William Blair's calendar 2019 EPS estimates, at a discount to the comp group's 19.7 times multiple. 

The Price Action

Sapiens shares have lost about 15.8 percent year-to-date.

The stock was down 3.3 percent at the time of publication at $9.38. 

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