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Should You Add NMI Holdings (NMIH) Stock to Your Kitty Now?
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NMI Holdings’ (NMIH - Free Report) improving mortgage insurance portfolio, higher new insurance written volume, a comprehensive reinsurance program, solid capital position, effective capital deployment along with favorable growth estimates make it worth adding to one’s portfolio.
NMIH has a solid track record of beating earnings estimates in the last 20 quarters. It has a VGM Score of A.
Zacks Rank & Price Performance
NMI Holdings currently carries a Zacks Rank #2 (Buy). Year to date, the stock has lost 8.7%, in line with the industry.
Image Source: Zacks Investment Research
Northbound Estimate Revision
The Zacks Consensus Estimate for 2022 and 2023 has moved 4.1% and 2.5% north in the last 30 days reflecting analyst optimism.
Growth Projections
The Zacks Consensus Estimate for NMI Holdings’ 2022 earnings is pegged at $3.33, indicating a 22% increase from the year-ago reported figure on 10% higher revenues of $533.5 million. The consensus estimate for 2023 earnings is pegged at $3.76, indicating a 12.9% increase from the year-ago reported figure on 14.4% higher revenues of $610 million.
Return on Equity
Return on equity was 17.4% in the trailing twelve months, better than the industry average of 5.7%.
Business Tailwinds
Growth in monthly and single premium policy, a strong mortgage origination market and increased private mortgage insurance penetration rates make NMI Holdings well poised for growth. The mortgage insurer noted that though increasing interest rates would impact refinancing activity, purchase origination volume should remain strong.
Given the strong housing market with continued demand, appreciation in house price and favorable mortgage insurance market, the insurer expects pricing and new insurance written volume to improve.
NMI Holdings has a superior primary insurance in-force (IIF) portfolio that generates industry-leading growth.
NMIH noted that new business opportunity has been fueling Private MI Industry IIF growth. Total Private MI industry IIF is estimated to grow to $2 trillion by 2024. NIW is expected to grow $500-600 billion annually to $2.9 trillion by 2024, attributable to millennial demand, driven by increased access and affordability among others.
NMI Holdings has a comprehensive reinsurance program in place for the entirety of the in-force portfolio. This, in turn, enhances its return profile, absorbs loss, provides efficient growth capital and mitigates the impact of credit volatility.
The insurer remains focused on efficiency and expense management, driving improved margins.
Banking on a solid capital position, NMIH has a $125 million worth share buyback program, effective through Dec 31, 2023, of which $94.6 million is available.
All these together should help the insurer continue to generate solid mid-teens shareholders’ returns.
Attractive Valuation
NMIH shares are trading at a discount than the industry average. Its price-to-book value of 1.11X is lower than the industry average of 1.31X. Before valuation expands, it is preferable to take a position in the stock. It has a Value Score of A. Back-tested results have shown that stocks with a Value Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2 offer better returns.
The Zacks Consensus Estimate for Berkshire Hathaway’s 2022 and 2023 earnings implies 14.4% and 5.9% year-over-year growth, respectively. The average four-quarter surprise is 17.55%.
The Zacks Consensus Estimate for BRK.B’s 2022 and 2023 earnings has moved 7.6% and 8.8% north, respectively, in the past 60 days. Year to date, shares of BRK.B have lost 6.7%.
American Financial’s earnings surpassed estimates in the last four quarters, the average earnings surprise being 37.09%.
The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 1% north each in the past 30 days. Year to date, shares of AFG have lost 5.2%.
The Zacks Consensus Estimate for Arch Capital’s 2022 and 2023 earnings implies 29.6% and 18.1% year-over-year growth, respectively. The average four-quarter surprise is 33.64%.
The Zacks Consensus Estimate for ACGL’s 2022 and 2023 earnings has moved 9.2% and 7.2% north in the past 60 days, respectively. Year to date, shares of ACGL have increased 6.8%.
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Should You Add NMI Holdings (NMIH) Stock to Your Kitty Now?
NMI Holdings’ (NMIH - Free Report) improving mortgage insurance portfolio, higher new insurance written volume, a comprehensive reinsurance program, solid capital position, effective capital deployment along with favorable growth estimates make it worth adding to one’s portfolio.
NMIH has a solid track record of beating earnings estimates in the last 20 quarters. It has a VGM Score of A.
Zacks Rank & Price Performance
NMI Holdings currently carries a Zacks Rank #2 (Buy). Year to date, the stock has lost 8.7%, in line with the industry.
Image Source: Zacks Investment Research
Northbound Estimate Revision
The Zacks Consensus Estimate for 2022 and 2023 has moved 4.1% and 2.5% north in the last 30 days reflecting analyst optimism.
Growth Projections
The Zacks Consensus Estimate for NMI Holdings’ 2022 earnings is pegged at $3.33, indicating a 22% increase from the year-ago reported figure on 10% higher revenues of $533.5 million. The consensus estimate for 2023 earnings is pegged at $3.76, indicating a 12.9% increase from the year-ago reported figure on 14.4% higher revenues of $610 million.
Return on Equity
Return on equity was 17.4% in the trailing twelve months, better than the industry average of 5.7%.
Business Tailwinds
Growth in monthly and single premium policy, a strong mortgage origination market and increased private mortgage insurance penetration rates make NMI Holdings well poised for growth. The mortgage insurer noted that though increasing interest rates would impact refinancing activity, purchase origination volume should remain strong.
Given the strong housing market with continued demand, appreciation in house price and favorable mortgage insurance market, the insurer expects pricing and new insurance written volume to improve.
NMI Holdings has a superior primary insurance in-force (IIF) portfolio that generates industry-leading growth.
NMIH noted that new business opportunity has been fueling Private MI Industry IIF growth. Total Private MI industry IIF is estimated to grow to $2 trillion by 2024. NIW is expected to grow $500-600 billion annually to $2.9 trillion by 2024, attributable to millennial demand, driven by increased access and affordability among others.
NMI Holdings has a comprehensive reinsurance program in place for the entirety of the in-force portfolio. This, in turn, enhances its return profile, absorbs loss, provides efficient growth capital and mitigates the impact of credit volatility.
The insurer remains focused on efficiency and expense management, driving improved margins.
Banking on a solid capital position, NMIH has a $125 million worth share buyback program, effective through Dec 31, 2023, of which $94.6 million is available.
All these together should help the insurer continue to generate solid mid-teens shareholders’ returns.
Attractive Valuation
NMIH shares are trading at a discount than the industry average. Its price-to-book value of 1.11X is lower than the industry average of 1.31X. Before valuation expands, it is preferable to take a position in the stock. It has a Value Score of A. Back-tested results have shown that stocks with a Value Score of A or B combined with a Zacks Rank #1 (Strong Buy) or #2 offer better returns.
Other Stocks to Consider
Some other top-ranked stocks from the insurance industry are Berkshire Hathaway (BRK.B - Free Report) , American Financial Group (AFG - Free Report) and Arch Capital Group (ACGL - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Berkshire Hathaway’s 2022 and 2023 earnings implies 14.4% and 5.9% year-over-year growth, respectively. The average four-quarter surprise is 17.55%.
The Zacks Consensus Estimate for BRK.B’s 2022 and 2023 earnings has moved 7.6% and 8.8% north, respectively, in the past 60 days. Year to date, shares of BRK.B have lost 6.7%.
American Financial’s earnings surpassed estimates in the last four quarters, the average earnings surprise being 37.09%.
The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 1% north each in the past 30 days. Year to date, shares of AFG have lost 5.2%.
The Zacks Consensus Estimate for Arch Capital’s 2022 and 2023 earnings implies 29.6% and 18.1% year-over-year growth, respectively. The average four-quarter surprise is 33.64%.
The Zacks Consensus Estimate for ACGL’s 2022 and 2023 earnings has moved 9.2% and 7.2% north in the past 60 days, respectively. Year to date, shares of ACGL have increased 6.8%.