Kemper’s stock price has taken a beating over the past six months, shedding 42.3% of its value and falling to $30.49 per share. This was partly driven by its softer quarterly results and might have investors contemplating their next move.

Is now the time to buy Kemper, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Do We Think Kemper Will Underperform?

Even with the cheaper entry price, we're cautious about Kemper. Here are three reasons we avoid KMPR and a stock we'd rather own.

1. Declining Net Premiums Earned Reflect Weakness

When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are:

• Gross premiums - what’s ceded to reinsurers as a risk mitigation and transfer strategy

Kemper’s net premiums earned has declined by 1.2% annually over the last five years, much worse than the broader insurance industry and in line with its total revenue.

2. EPS Trending Down

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Sadly for Kemper, its EPS declined by 11.7% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.

3. Substandard BVPS Growth Indicates Limited Asset Expansion

In the insurance industry, book value per share (BVPS) provides a clear picture of shareholder value, as it represents the total equity backing a company’s insurance operations and growth initiatives.

Disappointingly for investors, Kemper’s BVPS grew at a tepid 8.2% annual clip over the last two years.

Final Judgment

We see the value of companies helping consumers, but in the case of Kemper, we’re out. After the recent drawdown, the stock trades at 0.6× forward P/B (or $30.49 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now. We’d suggest looking at a top digital advertising platform riding the creator economy.

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