Stewart Information Services Corp (STC) Well-Positioned for Refinance Downturn with Mix of Title Revenue

June 11, 2013

Stewart Information Services Corp (STC) is better positioned than other title insurance names to handle the expected downturn in refinance transactions, as STC has a mix of residential title revenue that is 70% purchase and 30% refinance, therefore positioning the company to keep their revenue and earnings stable and even up in the next couple of years, says Brett Huff, Research Analyst at Stephens Inc.

“Refinance activity has been very high over the last year, year and a half because rates are low. And we suspect with those refinance transactions that growth will level off and then start to decline as most people will have refied over the next couple of quarters,” Huff said. “We think Stewart is best positioned to handle this downturn in refi, simply because their mix of revenue of residential title revenue is 70% purchase and 30% refi. So relatively low percentage of refi.”


Huff believes that STC‘s revenue and earnings will be stable and possibly up in the next year or two more, and he also point company-specific factors that position STC well for the future.

“[Stewart] has some company-specific things that it’s doing. Its operational execution prior to a new CEO coming on about a year and a half ago was subpar for the industry, and as a result they tend to have a lower multiple both on book value and on EPS. We think they are doing good work on improving their operations, have done so and will continue to do so. So we think there are some company-specific things that Stewart could drive to provide upside to expectations in 2014,” Huff said.