Shares of NMI Holdings NMIH have gained 23.1% year to date, underperforming the industry’s growth of 26.5% and the S&P 500 composite’s rise of 25.3%. The company has outperformed the  Finance sector’s rally of 17.2%.

NMIH shares are trading well above the 50-day moving average, indicating a bullish trend.

An improving mortgage insurance portfolio, higher new insurance written volume, a comprehensive reinsurance program, a solid capital position and effective capital deployment should drive NMI Holdings’ stock.

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Discounted Valuation

NMIH shares are trading at a price-to-book multiple of 1.33, lower than the industry average of 1.53. This insurer has a Value Score of B, reflecting an attractive valuation.

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Other mortgage insurers, such as Kinsale Capital KNSL, MGIC Investment Corporation MTG and Radian Group RDN, are trading at a discount to the industry average.

NMIH’s Favorable Return on Capital

NMI Holdings’ return on equity (ROE) for the trailing 12 months is 17.8%, better than the industry average of 8%. This reflects efficiency in utilizing its shareholders’ funds. It targets 13% ROE over the medium term.

Also, the return on invested capital in the trailing 12 months was 14.4%, better than the industry average of 5.8%, which reflected the insurer’s efficiency in utilizing funds to generate income.

Mixed Analyst Sentiment on NMIH

While one of four analysts covering the stock raised estimates for 2024, one lowered the same for 2025. The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 1 cent up and 3 cents down, respectively, in the past 30 days.

Factors Favoring NMIH

NMI Holdings stands to gain from business opportunities from a growing mortgage insurance market. Per the Federal Reserve, the U.S. residential mortgage market is one of the largest in the world, with nearly $13 trillion of mortgage debt outstanding as of Dec. 31, 2023, and includes both primary and secondary components. The company’s mortgage insurance portfolio is expected to create a strong foundation for earnings.

Growth in monthly and single premium policy production is tied to the increased penetration of existing customer accounts.  New customer account activation will also drive results.

NMIH has been focused on efficiency and expense management to improve margins.

NMI Holdings’ comprehensive reinsurance program for its in-force portfolio shields it from credit volatility, enhances its return profile, absorbs losses and supports capital growth. NMIH engages in share buybacks and has a $124.9-million share repurchase program under its kitty.

All these together should help the insurer continue generating solid mid-teen shareholders’ returns.

Average Target Price for NMIH Suggests Solid Upside

Based on short-term price targets offered by eight analysts, the Zacks average price target is $43.50 per share. The average suggests an 18.9% upside from Friday’s closing price.

Optimistic Growth Projections

The Zacks Consensus Estimate for NMI Holdings’ 2024 earnings is pegged at $4.54, which indicates an 18.2% increase from the year-ago reported figure on 12.9% higher revenues of $653.5 million. The consensus estimate for 2025 earnings per share is pegged at $4.7, which implies a 3.5% year-over-year increase on 7.5% higher revenues of $702 million.

The expected long-term growth rate is pegged at 9.1%. NMI Holdings’ superior primary insurance in-force portfolio generates industry-leading growth.

Parting Thoughts on NMIH Stock

NMI Holdings is well-poised for growth on new primary insurance written, direct primary insurance in force and a better risk-based capital ratio. A positive growth projection, a target price reflecting an upside and a VGM Score of A instill confidence in the stock.

Though its leverage compares favorably with the industry average, lower interest earned times keep us cautious. Also, given mixed analyst sentiment, investors who already own it should retain the Zacks Rank #3 (Hold) stock and news investors should wait for some more time.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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MGIC Investment Corporation (MTG) : Free Stock Analysis Report

Radian Group Inc. (RDN) : Free Stock Analysis Report

NMI Holdings Inc (NMIH) : Free Stock Analysis Report

Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report

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