$33.91
$85.81
bear $33.91
base $64.05
bull $85.81
margin of safety $32.00
market price* $52.54
Stewart Information Services is one of the four national US title insurers. Its main business, the title segment, issues title insurance and runs closings and escrow on residential and commercial real estate deals, both through its own offices and through independent agents, in the United States, Canada and the United Kingdom. About 53% of 2025 title revenue came from Texas, New York, Ohio, California, Florida, Michigan and international markets (mainly Canada). A smaller real estate solutions segment sells credit, valuation, data and field services to lenders and servicers, including Informative Research, PropStream and, since December 2025, Mortgage Contracting Services (MCS), a property-preservation business bought for $332.7 million, the largest deal in Stewart's history. Lenders require title insurance on almost every mortgage-financed purchase or refinance, so the business lasts. What it earns each year depends almost entirely on how many homes and commercial properties change hands or refinance, and on their prices. Owner earnings. We start from operating cash flow and remove working-capital swings, including the year-to-year change in the title-loss reserve. That way claims are charged when they are expected, not when they are paid. We then deduct stock compensation, the capital spending needed to maintain the business (including capitalized software), and the share of earnings that belongs to outside partners in Stewart's part-owned agencies. Amortization of acquired intangibles, about $32 million a year, is added back because it is a sunk acquisition cost. The decay of those acquired customer relationships is handled in the growth assumptions, not the earnings level. Per share, owner earnings were $3.66 in 2016, $3.05 in 2017, $2.94 in 2018 and $4.50 in 2019. The 2019 figure includes a one-time $50 million merger-termination fee from Fidelity National Financial, and is about $2.84 without it. They were then $6.44 in 2020, $12.02 in 2021, $6.48 in 2022, $1.89 in 2023, $3.22 in 2024 and $3.93 in 2025. That is a highly cyclical stream. The 2020-2021 peak came from refinancing driven by 3% mortgage rates, and those conditions have reversed. 2023 was the trough after rates passed 7%. Earnings level. We measure from 2022, after the 2020-2022 acquisitions turned Stewart into a larger and different business, and leave out the 2020-2021 zero-rate boom. The median for 2022-2025 is about $3.58, and we use $3.60 a share. 2025 ($3.93) was earned while existing-home sales were near 30-year lows. MCS adds earnings from 2026, but it was paid for with 2.2 million new shares and a $200 million credit-line draw, so we do not count it as adding to earnings per share. The first half of 2026 (net income to Stewart of $54.2 million against $35.0 million a year earlier) suggests this level is conservative but does not yet justify raising it. Owner earnings per share grew 22% in 2025. The base case assumes only 1.5% for next year, because most of 2025's gain came from transaction volume, and volume is not something we can count on. Debt. Stewart owes $646.6 million: $446 million of 3.6% senior notes due 2031 and $200 million drawn on its credit line at about 5.4%. For an insurer we value earnings after interest and do not subtract the debt a second time, so the case values below are already what is left for shareholders after the lenders. Each case charges the extra interest when the 2031 notes are refinanced at a higher rate. Base case ($64.05 a share). Earnings start at $3.60 and grow 1.5% a year. Title premiums are set as a percentage of property value, so revenue rises with home prices; that mechanism is evidenced by revenue per share growing about 1.7% a year from 2015 to 2025, acquisitions included. We give no credit for a recovery in housing volumes, for margin-improvement plans, or for future acquisitions. Refinancing the 2031 notes at about 6% costs about $0.27 a share a year from then on. After year ten, earnings stay flat. Title insurance is a required, regulated product that Stewart has sold since 1893, so we expect the earning power to persist, but we credit no further growth. Bear case ($33.91 a share). Two normal years are followed by a housing and mortgage bust like 2007-2011, when transaction volumes collapsed, claims spiked and Stewart reported losses for several straight years. We model owner earnings of about -$2.00 and -$1.00 a share in the two worst years, then a slow recovery over four more years. To protect its insurers' capital through the downturn, Stewart issues 15% more shares at depressed prices. The 2031 notes are refinanced at about 7.5%. Earnings recover to only 95% of today's level, because alternatives to title insurance, such as attorney opinion letters, take part of the refinance business (a risk the company names). The bear value is far above tangible book value of about $1.50 a share, because almost all of Stewart's equity is goodwill from buying agencies. The franchise is worth more than its capital because a title insurer needs little capital to write business, and Stewart's own history shows it earns its way back after a housing bust. Bull case ($85.81 a share). Earnings start at $4.20 a share: the 2025 level plus a full year of MCS, net of the credit-line interest. The first two quarters of 2026 support that starting point. Earnings then grow 3% a year as premiums track home prices and the real estate solutions businesses are integrated. The 2031 notes refinance at about 5.5%, and earnings stay flat after year ten. This case still assumes no recovery in transaction volumes. It could be too low if existing-home sales return to the 5 million-plus pace of 2015-2019. What could make this wrong. The earnings level is uncertain: owner earnings fell 71% from 2022 to 2023. Capital spending jumped to $73 million in 2025 and ran at $42 million in the first half of 2026. If that is lasting maintenance spending rather than a one-time technology and integration push, normal earnings are about $0.50-$1.00 a share lower than we assume. Claims reserves also need watching, because title claims can surface many years after a policy is written. Margin-of-safety price. We are moderately confident in the $3.60 level: it is the median of a period that includes both a deep trough and a strong year, but this business has earned anywhere from $1.89 to $12 a share in five years. The worst plausible outcome is a multi-year housing bust together with a jump in claims. With fixed-rate notes not due until 2031, a BBB rating and little capital needed to write title business, Stewart should survive that, but shareholders would probably be diluted and see the dividend cut. If we are wrong on the level ($3.00 instead of $3.60), on growth (none) and on refinancing (7.5%), the shares are worth roughly $40-45. Housing cycles can take three to five years to turn, and the current dividend is $2.10 a share. At $32 a share, the price is under nine times normal owner earnings and the dividend yield is above 6%. If earnings simply hold at today's level and the share price comes to reflect them within about four years, the base case implies roughly 20% a year from that price. The bear case value is about equal to that price. The margin-of-safety price is $32.