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Should You Hold NMI Holdings (NMIH) Stock in Your Portfolio?

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NMI Holdings Inc. (NMIH - Free Report) has been gaining momentum on the back of the growing U.S. mortgage insurance market, higher single premium policy cancellations and flexible liquidity.

Estimate Revision

The Zacks Consensus Estimate for 2022 earnings has moved 0.4% north in the past 60 days. This should instill investors' confidence in the stock.

Earnings Surprise History

NMI Holdings has a decent earnings surprise history. It beat estimates in each of the last four quarters, with the average being 8.32%.

Return on Equity (ROE)

NMI Holdings’ ROE for the trailing 12 months is 15.7%, better than the industry average of 5.6%, reflecting the company’s efficiency in utilizing shareholders’ funds. 

Style Score

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

Business Tailwinds

Riding on the broad resiliency of the housing market, growth in total mortgage origination volume and increasing size of the U.S. mortgage insurance market, new insurance written (NIW), the primary driver of insurance-in-force (IIF), of the mortgage insurer is expected to improve. Also, the continued expansion of customer franchise and growth in monthly and single premium policy production tied to the growth in customer franchise and market presence are expected to boost NIW of the insurer.

NIW, together with persistency, drives IIF. Persistency will continue to improve in 2022 with a decrease in refinancing activity.

NMI Holdings remains well poised to gain from the growth of IIF, increased monthly policy production and higher single premium policy cancellations, which continue to contribute to net premiums earned, one of the key drivers of top-line growth.

Net investment income is expected to improve with the growth in the size of the total investment portfolio and an increase in book yield.

Such premium growth as well as improved investment income should benefit the top line, which witnessed a seven-year CAGR (2014-2020) of 52.9%. The Zacks Consensus Estimate for the company’s 2022 revenues is pegged at $541.1 million, indicating year-over-year increases of 11.1%.

NMI Holdings expects to continue to deliver strong mid-teen returns. The insurer expects the growing size and attractive credit profile of the insured portfolio, as well as a broadly disciplined approach to managing risks, expenses and capital to continue to boost performance.

The insurer boasts a strong balance sheet with significant financial flexibility. It has $400 million of outstanding senior notes. In November 2021, it amended its senior secured revolving credit facility, which has been increased to $250 million. The maturity has been extended from Feb 22, 2023 to Nov 10, 2025.

Zacks Rank & Price Performance

NMI Holdings currently carries a Zacks Rank #3 (Hold). In the past year, the stock has lost 0.6% compared with the industry’s growth of 17.1%. Solid mortgage insurance portfolio and robust capital position are expected to help the stock bounce back.

Zacks Investment ResearchImage Source: Zacks Investment Research

Stocks to Consider

Some better-ranked property and casualty insurers are Fidelity National Financial (FNF - Free Report) , Hallmark Financial Services (HALL - Free Report) and First American Financial (FAF - Free Report) . While Fidelity National and Hallmark Financial sport a Zacks Rank #1 (Strong Buy), First American carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fidelity National’s earnings surpassed estimates in each of the last four quarters, the average beat being 38.18%.

In the past year, Fidelity National has gained 35.9%. The Zacks Consensus Estimate for 2022 earnings has moved 9.3% north in the past 60 days.

The bottom line of Hallmark Financial surpassed estimates in two of the last four quarters and missed the same in the other two, the average being 53.62%.

In the past year, Hallmark Financial stock has rallied 32.2%.

First American’s earnings surpassed estimates in each of the last four quarters, the average beat being 29.19%.

In the past year, First American has gained 52.9%. The Zacks Consensus Estimate for 2022 earnings has moved 0.4% north in the past 30 days.