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Here's Why Investors Should Hold MGIC Investment (MTG) Stock

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MGIC Investment Corporation (MTG - Free Report) has been gaining momentum on the back of improved investment portfolio, higher profit commission, lower new delinquency notices as well as solid capital position.

Growth Projections

The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $1.7 and $1.89, indicating year-over-year increase of 28.7% and 11.1%, respectively.

Estimate Revision

Estimates for 2021 and 2022 have moved up 1.2% and 1.6%, respectively, in the past 30 days that reflects investors’ optimism.

Earnings Surprise History

MGIC Investment has a decent earnings surprise history. It beat estimates in each of the last four quarters, with the average being 11.33%.

Zacks Rank & Price Performance

MGIC Investment currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 65.3% compared with the industry’s increase of 36.1%.

Zacks Investment Research
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Return on Equity (ROE)

The company’s ROE for the trailing 12 months is 12.7%, better than the industry average of 9.8%. This reflects the company’s efficiency in utilizing shareholders’ funds. 

Style Score

The company has a favorable VGM Score of A. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.

Business Tailwinds

Increases in insurance in-force, profit commission and higher premium yield should continue to boost net premiums earned.

Riding on higher consolidated investment portfolio and investment yields, net investment income is likely to improve.

Strength of the purchase mortgage market and its position in the market should drive new insurance written.

By virtue of improving economic conditions, the quality of existing book of business and reduction in new delinquency notices, the loss ratio is likely to improve.

Declining losses and claims continue to boost MGIC Investment’s balance sheet. The company expects claim payments to remain modest for several quarters.

It boasts a strong balance sheet and its balanced approach toward maintaining a strong capital position maximizes the long-term value of the company. It has a low debt-to-capital ratio. Its debt to capital of 20.2% is better than the industry average of 29.5%. Banking on lower levels of losses and taxes paid and higher net premium written, the multi-line insurer continues to generate solid operating cash flows.

The company aims to resume share repurchase program in the third quarter and expects to completely utilize the remaining $291 million repurchase authorization prior to its expiration at year-end 2021.

Key Players

Some better-ranked players in the multi-line insurance industry include American International Group, Inc. (AIG - Free Report) , Horace Mann Educators Corporation (HMN - Free Report) , and CNO Financial Group, Inc. (CNO - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American International surpassed estimates in three of the last four quarters (while missing in one), with the average being 15.09%.

Horace Mann Educators surpassed estimates in each of the last four quarters, with the average being 21.12%.

CNO Financial surpassed estimates in three of the last four quarters (while missing in one), with the average being 26.12%.