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NMI Holdings (NMIH) Stock Jumps 58% in a Year: Here's Why

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NMI Holdings, Inc. (NMIH - Free Report) stock is favored by investors, corroborated by its share price movement. Shares of the company have soared nearly 58.1% in a year’s time, outperforming its industry's rally of roughly 13.2%.


What’s Behind the Surge?

The property and casualty (P&C) insurer has been witnessing premium growth over a considerable period of time with the company registering a noticeable surge of 65% in the first quarter. This improvement was attributable to high-quality insurance in force. We expect this growth trajectory to continue in the near term on the back of improving mortgage insurance in force.

Given the rising interest rates, the company has been experiencing better investment results and this momentum is likely to continue on the back of a growing investment portfolio and higher new money rates.

NMI Holdings has been actively widening its client base. With 21 new customers in the first quarter, the client base has grown to about 900 mortgage originators.

Revenues have been improving over the past few years, primarily driven by better-than-expected investment results as well as a premium performance. This in turn has been boosting bottom-line results.

The company’s solid financial position was reflected by its robust return on equity with the company having delivered a record adjusted return on equity of 15.9% in the first quarter, which expanded 1120 basis points from the year-ago quarter. The company projects to deliver a return on equity in mid-teens for 2018.

Continued premium increase and a sturdy return on equity have reiterated the company’s strong outlook for its business as well as financial performance.  

NMI Holdings remains focused on further building its portfolio of high quality mortgage insurance along with managing risk and expenses and as the year progresses, it is expected that the core operating leverage will possibly drive margin expansion and a solid mid-teens return on equity to exceed the company’s cost of capital.

Other Noteworthy Factors

NMI Holdings sports a Zacks Rank #1 (Strong Buy). With optimism surrounding the stock’s healthy performance, the Zacks Consensus Estimate for 2018 and 2019 has been revised about 4.3% and 9.1% upward, respectively, in the last 60 days.

The consensus mark for earnings translates to a year-over-year improvement for both 2018 and 2019. The Zacks Consensus Estimate for current-year earnings per share is pegged at $1.45, representing a whopping year-over-year surge of 154.4%. For 2019, the consensus estimate for the metric stands at $2.04, reflecting a year-over-year rise of 40.3%.

Also, the company delivered a positive earnings surprise in three of the last four quarters with an average beat of 24.55%.

The stock carries an impressive Growth Score of B. Back tested results have shown that stocks with a favorable Growth Score of A or B coupled with a bullish Zacks Rank #1 (Strong Buy) and 2 (Buy) are best lucrative investment bets.

Other Stocks to Consider

Investors interested in some other top-ranked stocks from the same space can also consider Alleghany Corporation (Y - Free Report) , Federated National Holding Company (FNHC - Free Report) and RLI Corp. (RLI - Free Report) , each with a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered positive surprises in three of the last four quarters with an average beat of 17.61%.

Federated National deals in insurance underwriting, distribution and claims processing business in the United States. The company came up with positive earnings surprises in all the trailing four quarters with an average beat of 23.03%.

RLI Corp. underwrites property and casualty insurance in the United States and globally. The company pulled off positive surprises in each of the last four quarters with an average beat of 33.65%.

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