Skyward Specialty Insurance Group, Inc. SKWD has been trading below its 50-day simple moving average (SMA), signaling a short-term bearish trend. As of Jan. 16, 2025, its share price was $45, down 19.1% from its 52-week high of $55.62

The 50-day SMA is a key indicator for traders and analysts to identify support and resistance levels. It is considered particularly important as it is the first marker of an uptrend or downtrend. 

With a market capitalization of $1.8 billion, Skyward Specialty operates in an underpenetrated niche market for which standard insurance coverages are insufficient or inadequate. Thus, with tailor-made products and services, prudent underwriting and technology, this insurer is well poised to capitalize on the market opportunities. Notably, all eight divisions are now at a scale that can sustainably contribute to overall earnings.

SKWD Trading Below 50-Day Moving Average

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SKWD is an Outperformer

Shares of Skyward Specialty have gained 14.9% in the past six months, outperforming its industry’s increase of 1.4%, the sector’s rise of 5.3% and the Zacks S&P 500 composite’s gain of 5% in the same time frame.

SKWD Vs. Industry, Sector and S&P 500 in 6 Months

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Based on short-term price targets offered by nine analysts, the Zacks average price target is $54.11 per share. The average suggests a potential 22% upside from Wednesday’s closing price.

Optimistic Growth for SKWD

The Zacks Consensus Estimate for 2025 earnings implies a 10.1% year-over-year increase on 11.1% higher revenues of 11.1%. 

SKWD has a Growth Score of B. The expected long-term earnings growth rate is pegged at 18%, better than the industry average of 11.2%.

SKWD’s Growth Strategy

Skyward Specialty is focusing on high-return areas that are less exposed to P&C cycles, prudent pricing, better retention and shifting of the business mix toward more profitable lines. Combined ratio too is expected to improve given this growth focus. 

The addition of Life Sciences liability coverage to its Healthcare Solutions underwriting unit should provide a competitive advantage. Skyward Specialty envisions being a leader in the life sciences liability market.

SKWD is de-risking its portfolio and diverting free cash flow to fixed income.  This prudent investment strategy has been paying off well. Despite the recent rate cuts with more on the horizon, a broader invested asset base will aid SKWD in maintaining healthy investment results. 

Skyward Specialty strengthened its balance sheet by lowering its debt balance while improving its cash balance, which offers financial flexibility. Though its leverage compares favorably with the industry average, the times interest earned compares unfavorably with the industry average.

SKWD’s Favorable Return on Capital

Return on equity in the trailing 12 months was 16.4%, higher than the industry average of 7.6%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.

Its return on invested capital (ROIC) has been increasing in the last few quarters. The insurer has also invested over the same time period. This reflects SKWD’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 13.2%, higher than the industry average of 5.8%.

SKWD Shares Are Expensive

Its shares are trading at a premium to the  industry. Its price-to-book value of 2.26X is higher than the industry average of 1.51X.

The company has a Value Score of B. This style score helps find the most attractive value stocks. Back-tested results have shown that stocks with a Growth Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy) offer better returns.

Shares of other insurers like Aflac Inc AFL, The Progressive Corporation PGR and The Travelers Companies TRV are also trading at a multiple higher than the industry average.

Parting Thoughts on SKWD Stock

The insurer is poised to grow on an improved top line, expanded margins and sufficient financial flexibility. Its compelling portfolio offers the best risk-adjusted returns on capital, enabling SKWD to enjoy low underwriting volatility and a competitive moat. A VGM Score of A instills confidence in the stock.

However, given its expensive valuation, it is better to wait for some more time before taking a call on this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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