Value
8.1/10data confidence 83%| Component | Sub-score |
|---|---|
| P/E | 10.0 |
| P/S | 9.2 |
| EV/EBITDA | 7.2 |
| Fwd P/E | 5.4 |
| PEG | 10.0 |
- ▸Forward P/E: 23.7x
- ▸PEG: 0.35
- ▸Attractively valued
WTM · Why this verdict
Why White Mountains Insurance (WTM) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score6.7/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
White Mountains Insurance Group trades at a significant valuation premium relative to trailing earnings due to an expected 78% earnings decline — a cyclical peak reversal — while the balance sheet retains attractive peer-relative margins of 37% and an on-balance volume trend that is rising despite price weakness.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Forward earnings are expected to decline approximately 78% from trailing levels, with a forward price-to-earnings of 22.6x versus a trailing of approximately 5x — a 4.5x expansion that signals the market is pricing in a significant earnings trough at current levels. Warnings | Forward earnings stabilize and the forward price-to-earnings ratio falls back below 15x as normalized earnings recover within 12 months. | Tripped↑Improving |
| CounterSpecialty insurance companies routinely experience earnings volatility tied to catastrophe loss cycles, and what appears to be a cyclical peak reversal may recover faster than consensus expects. | ||
Net margins of 37% rank among the best in the property and casualty insurance peer group, indicating the underlying underwriting and investment operations generate superior returns in normal operating periods. Quality breakdown | Net margins remain above 25% even during the expected earnings trough, confirming the quality of the underwriting franchise. | ↓Deteriorating |
| CounterThe earnings quality flag shows free cash flow at only 24% of net income, suggesting that the 37% net margin overstates real cash generation due to accrual-based insurance accounting. | ||
Heavy reliance on BAM (Build America Mutual) and a top-3 carrier concentration of 61% at Distinguished represent significant revenue dependency that could amplify earnings volatility during the expected earnings decline cycle. Bear case | No material revenue loss from counterparty or customer concentration changes is reported over the next 12 months, and the top-3 carrier share does not exceed 70%. | ↑Improving |
| CounterLong-standing relationships with concentrated counterparties in specialty insurance can be highly sticky, making the concentration risk lower in practice than the percentage suggests. | ||
Rising on-balance volume while the price trades below its 200-day moving average suggests accumulation by informed buyers who view the cyclical earnings trough as a buying opportunity ahead of a potential recovery. Momentum breakdown | Price rises above the 200-day moving average within 6 months as the earnings trough becomes visible and buyers who have been accumulating push the stock higher. | ↓Deteriorating |
| CounterRising on-balance volume below the 200-day moving average can persist for extended periods in value traps where buyers continue accumulating while the fundamental thesis continues to deteriorate. | ||
Forward earnings are expected to decline approximately 78% from trailing levels, with a forward price-to-earnings of 22.6x versus a trailing of approximately 5x — a 4.5x expansion that signals the market is pricing in a significant earnings trough at current levels.
Tripped↑ImprovingWarnings
- Expectation
- Forward earnings stabilize and the forward price-to-earnings ratio falls back below 15x as normalized earnings recover within 12 months.
CounterSpecialty insurance companies routinely experience earnings volatility tied to catastrophe loss cycles, and what appears to be a cyclical peak reversal may recover faster than consensus expects.
Net margins of 37% rank among the best in the property and casualty insurance peer group, indicating the underlying underwriting and investment operations generate superior returns in normal operating periods.
↓DeterioratingQuality breakdown
- Expectation
- Net margins remain above 25% even during the expected earnings trough, confirming the quality of the underwriting franchise.
CounterThe earnings quality flag shows free cash flow at only 24% of net income, suggesting that the 37% net margin overstates real cash generation due to accrual-based insurance accounting.
Heavy reliance on BAM (Build America Mutual) and a top-3 carrier concentration of 61% at Distinguished represent significant revenue dependency that could amplify earnings volatility during the expected earnings decline cycle.
↑ImprovingBear case
- Expectation
- No material revenue loss from counterparty or customer concentration changes is reported over the next 12 months, and the top-3 carrier share does not exceed 70%.
CounterLong-standing relationships with concentrated counterparties in specialty insurance can be highly sticky, making the concentration risk lower in practice than the percentage suggests.
Rising on-balance volume while the price trades below its 200-day moving average suggests accumulation by informed buyers who view the cyclical earnings trough as a buying opportunity ahead of a potential recovery.
↓DeterioratingMomentum breakdown
- Expectation
- Price rises above the 200-day moving average within 6 months as the earnings trough becomes visible and buyers who have been accumulating push the stock higher.
CounterRising on-balance volume below the 200-day moving average can persist for extended periods in value traps where buyers continue accumulating while the fundamental thesis continues to deteriorate.
Per-dimension breakdown
Quality
7.0/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 6.8 |
| ROA | 2.4 |
| Gross margin | 6.7 |
| Op margin | 10.0 |
| Net margin | 10.0 |
| Current ratio | 5.3 |
| FCF quality | 4.7 |
| Moat | 9.0 |
| Piotroski F | 7.8 |
- ▸Strong margins: 38%
- ▸Earnings quality warning: 61% FCF/NI
- ▸Wide economic moat
- ▸Compounder quality: strong returns + growth
Growth
9.1/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 8.1 |
| EPS growth | 10.0 |
- ▸Strong growth: 22% YoY
Momentum
5.0/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 7.6 |
| MACD | 0.0 |
| OBV | 10.0 |
| MA position | 6.0 |
| Volume | 1.5 |
- ▸Uptrend pullback (RSI 39) - buy opportunity
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
5.0/10data confidence 67%| Component | Sub-score |
|---|---|
| Analyst rating | 5.0 |
| erm sentiment | 5.0 |
Insider
4.8/10data confidence 50%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 4.7 |
- ▸No net insider activity — $0 (0.000% of mkt cap)
Peer rank
7.3/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 6.3 |
| quality rank | 7.7 |
| growth rank | 7.8 |
- ▸Attractive P/E vs peers
- ▸Best-in-class margins
Technical
6.8/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 5.8 |
| support resistance | 6.3 |
| 52w position | 8.3 |
Risk (lower is worse)
7.1/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 7.0 |
| days to cover | 2.3 |
| volatility | 6.6 |
| beta | 10.0 |
| debt equity | 9.4 |
- ▸Concentration risks: 2 HIGH (10-K Item 1A — sized via position_sizing, validated via buy_confidence)
Catalyst
3.4/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 0.0 |
| earnings timing | 5.0 |
| surprise avg | 0.0 |
| dividend safety | 6.8 |
- ▸Earnings concerns: 1B/3M
How the verdict was assembled
Engine trigger
Maintain position. Not compelling to add more. | News modifier -1 (HOLD_IF_HOLDING → SELL_IF_HOLDING).
Engine technical detail
verdict_path:
L4:PATH_F_HOLD|L3:NEWS_MOD=-1Passed (6)
- MOMENTUM:5.0>=4.5
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- EARNINGS_PROXIMITY:80d clear
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (0)
none
Warning (3)
- MOMENTUM:5.0<5.5 (soft — BUY_NOW allowed but watch)
- ASYMMETRY:UPSIDE_EXHAUSTED (upside=0.0%)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
0.00
Upside
+0.0%
Downside
5.0%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilitySpeculative — Binary industry: Insurance - Property & Casualty
Investment implication
None of the engine's positive-conviction paths (C-quality, D-momentum) triggered — the F-path HOLD reflects balanced signals. Strongest-cleared gate: MOMENTUM:5.0>=4.5. Top dim: Growth at 9.1; weakest: Catalyst at 3.4. No conviction either direction.
The strongest dimensions are Growth at 9.1, Value at 8.1, and Peer rank at 7.3; the weakest are Catalyst at 3.4, Insider at 4.8, and Sentiment at 5.0. The V9 engine cleared all gates with 3 warnings, producing an asymmetric reward-to-risk of 0.00 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Cyclical Earnings Peak RiskTripped
Trip ifForward price-to-earnings rises above 30x, exceeding the already elevated 22.6x by more than 7 multiple points as earnings estimates decline further.
- P2Best In Class Margins
Trip ifNet margin falls below 15%, declining more than 22 percentage points from the current 37%.
- P3Counterparty Concentration Bam
Trip ifTop-3 carrier revenue concentration rises above 75%, increasing more than 14 percentage points above the current 61%.
- P4Volume Accumulation Below Trend
Trip ifPrice drops below $1,935.78, reaching the stop-loss level and falling more than 4.7% below the current $2,030.64.