Back to top

Image: Bigstock

Reasons Why You Should Retain NMI Holdings (NMIH) Stock

Read MoreHide Full Article

NMI Holdings Inc. (NMIH - Free Report) has been gaining momentum on the back of the growth in total mortgage origination volume, growth in monthly and single premium policy production and house price appreciation.

Growth Projections

The Zacks Consensus Estimate for NMI Holdings’ 2022 earnings is pegged at $3.24, indicating an 18.6% increase from the year-ago reported figure on 8.9% higher revenues of $528.2 million.

The consensus estimate for 2023 earnings stands at $3.94, indicating a 21.6% increase from the year-ago reported figure on 8.91% higher revenues of $575.3 million.

Northbound Estimate Revision

The Zacks Consensus Estimate for 2022 and 2023 earnings has moved 2.8% and 1.3% north, respectively, in the past 30 days. This should instill investors' confidence in the stock.

Earnings Surprise History

NMI Holdings has a decent earnings surprise history. This insurer has a solid track record of beating earnings estimates in the last seven quarters.

Return on Equity (ROE)

NMI Holdings’ ROE for the trailing 12 months is 16%, better than the industry average of 5.9%, and expanded 190 basis points year over year. This reflects its efficiency in utilizing shareholders’ funds. 

Style Score

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

Business Tailwinds

Considering the 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 the NIW of the insurer.

NMI Holdings expects mortgage insurance market conditions to remain favorable, with strong NIW volume and equally constructive pricing and risk dynamics. The housing market is likely to remain solid with sustained demand and house price appreciation.

NMIH continues to witness favorable credit performance with an increasing number of impacted borrowers curing their delinquencies and the emergence of fewer new defaults. Value of new business production and encouraging credit performance in the in-force portfolio are likely to drive significant profitability and strong mid-teen returns for the insurer.

Higher IIF, increased monthly policy production and higher single premium policy cancellations should benefit the net premiums earned of the insurer, one of the key drivers of revenue growth.

Riding on lower refinancing activity and an increasing amount of the NIW volume, NMIH expects continued improvement in persistency in 2022.

Riding on higher net premiums earned, NMIH expects a continuous improvement in efficiency and expense ratio going forward.

The insurer boasts a strong balance sheet with significant financial flexibility. NMIH has $400 million of outstanding senior notes as well as a $250 million revolving credit facility.

In February 2022, the board authorized a $125 million new share repurchase plan to improve the capital distribution opportunities for shareholders.

Zacks Rank

NMI Holdings currently carries a Zacks Rank #3 (Hold). In the past year, the stock has lost 9.1% against the industry’s growth of 22.3%. A solid mortgage insurance portfolio and robust capital position are expected to help the stock bounce back.

Zacks Investment Research
Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked insurers are United Fire Group, Inc. (UFCS - Free Report) , Kinsale Capital Group, Inc. (KNSL - Free Report) and Cincinnati Financial Corporation (CINF - Free Report) . United Fire currently sports a Zacks Rank #1(Strong Buy), whereas Kinsale Capital and Cincinnati Financial carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

United Fire’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 275.45%. In the past year, the UFCS stock has declined 14.5%.

The Zacks Consensus Estimate for UFCS’ 2022 and 2023 earnings has moved 122.2% and 76.9% north, respectively, in the past 60 days.

Kinsale Capital’s earnings surpassed estimates in each of the last four quarters, the average beat being 32.04%. In the past year, Kinsale Capital has rallied 38.9%.

The Zacks Consensus Estimate for KNSL’s 2022 and 2023 earnings has moved 3.8% and 3.5% north, respectively, in the past seven days.

The bottom line of Cincinnati Financial surpassed earnings estimates in each of the last four quarters, the average being 38.48%. In the past year, the insurer has rallied 24.2%.

The Zacks Consensus Estimate for Cincinnati Financial’s 2022 and 2023 earnings has moved 5.7% and 5.5% north, respectively, in the past 60 days.