In This Article:
Shares of NMI Holdings NMIH have gained 23.1% year to date, underperforming the industry’s growth of 26.5% and the S&P 500 composite’s rise of 25.3%. The company has outperformed the Finance sector’s rally of 17.2%.
NMIH shares are trading well above the 50-day moving average, indicating a bullish trend.
An improving mortgage insurance portfolio, higher new insurance written volume, a comprehensive reinsurance program, a solid capital position and effective capital deployment should drive NMI Holdings’ stock.
Image Source: Zacks Investment Research
Discounted Valuation
NMIH shares are trading at a price-to-book multiple of 1.33, lower than the industry average of 1.53. This insurer has a Value Score of B, reflecting an attractive valuation.
Image Source: Zacks Investment Research
Other mortgage insurers, such as Kinsale Capital KNSL, MGIC Investment Corporation MTG and Radian Group RDN, are trading at a discount to the industry average.
NMIH’s Favorable Return on Capital
NMI Holdings’ return on equity (ROE) for the trailing 12 months is 17.8%, better than the industry average of 8%. This reflects efficiency in utilizing its shareholders’ funds. It targets 13% ROE over the medium term.
Also, the return on invested capital in the trailing 12 months was 14.4%, better than the industry average of 5.8%, which reflected the insurer’s efficiency in utilizing funds to generate income.
Mixed Analyst Sentiment on NMIH
While one of four analysts covering the stock raised estimates for 2024, one lowered the same for 2025. The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 1 cent up and 3 cents down, respectively, in the past 30 days.
Factors Favoring NMIH
NMI Holdings stands to gain from business opportunities from a growing mortgage insurance market. Per the Federal Reserve, the U.S. residential mortgage market is one of the largest in the world, with nearly $13 trillion of mortgage debt outstanding as of Dec. 31, 2023, and includes both primary and secondary components. The company’s mortgage insurance portfolio is expected to create a strong foundation for earnings.
Growth in monthly and single premium policy production is tied to the increased penetration of existing customer accounts. New customer account activation will also drive results.
NMIH has been focused on efficiency and expense management to improve margins.
NMI Holdings’ comprehensive reinsurance program for its in-force portfolio shields it from credit volatility, enhances its return profile, absorbs losses and supports capital growth. NMIH engages in share buybacks and has a $124.9-million share repurchase program under its kitty.
All these together should help the insurer continue generating solid mid-teen shareholders’ returns.