NMI Holdings Inc. NMIH shares have rallied 39.5% in a year compared with the industry's growth of 29.6%. The Finance sector and the Zacks S&P 500 composite have returned 30.2% and 30%, respectively, in the same time frame. With a market capitalization of $3.02 billion, the average volume of shares traded in the last three months was 0.5 million. Currently priced at $38.27, the stock is a little below its 52-week high of $42.49.

NMIH Outperforms Industry, Sector, S&P in a Year

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The rally was largely driven by an improving mortgage insurance portfolio, higher new insurance written volume, a comprehensive reinsurance program, its solid capital position and effective capital deployment.

This insurer has a solid track record of beating earnings estimates in each of the last four quarters, the average being 9.69%.

NMIH Trading Above 200-Day Moving Average

This Zacks Rank #3 (Hold) property and casualty insurer is trading above its 200-day simple moving average (SMA) of $35.16, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

NMIH’s Growth Projection Encourages

The Zacks Consensus Estimate for NMI Holdings’ 2024 earnings per share indicates a year-over-year increase of 17.9%. The consensus estimate for revenues is pegged at $652.38 million, implying a year-over-year improvement of 12.6%. 

The consensus estimate for 2025 earnings per share and revenues indicates an increase of 4.4% and 7.6%, respectively, from the corresponding 2024 estimates.

NMI Holdings’ Favorable Return on Capital

Return on equity (ROE) for the trailing 12 months was 17.8%, comparing favorably with the industry’s 7.5%. This reflects its efficiency in utilizing shareholders’ funds. 

Also, return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame. This reflects NMIH’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 14.3%, better than the industry average of 5.8%.

Will NMIH’s Rally Stay?

The Zacks Consensus Estimate for 2024 earnings has moved 0.6% north in the past 30 days, reflecting analysts’ optimism.

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. NMIH stands to gain from new business opportunities from a growing mortgage insurance market. NMI Holdings’ mortgage insurance portfolio is expected to create a strong foundation for future 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. 

In order to enhance its return profile, absorb losses, provide efficient growth capital and mitigate the impact of credit volatility, NMI Holdings has a comprehensive reinsurance program for its in-force portfolio.

To drive margin expansion, NMIH remains focused on efficiency and expense management. NMI Holdings engages in share buybacks and has a $108.1 million share repurchase program under its kitty.

All these together should help the insurer continue to generate solid mid-teens shareholders’ returns.

The expected long-term growth rate is pegged at 9.1%. Notably, earnings grew 18.7% in the past five years, better than the industry average of 11.4%. NMI Holdings’ superior primary insurance in-force portfolio generates industry-leading growth. 

Attractive Valuation

NMIH’s shares are trading at a price-to-book multiple of 1.39, lower than the industry average of 1.59. Before valuation expands, it is wise to take a position in the stock.

Key Picks

Investors interested in the property and casualty insurance industry may look at some better-ranked players like First American Financial Corporation FAF, Mercury General Corporation MCY and ProAssurance Corporation PRA, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for First American’s 2024 and 2025 earnings indicates 6.3% and 31.7% year-over-year growth, respectively. In the past year, shares of FAF have gained 14.7%.

The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 3.8% and 5.3% north, respectively, in the past 30 days.

Mercury General's bottom line outpaced estimates in each of the trailing four quarters, the average surprise being 694.28%. In the past year, shares of MCY have rallied 108.8%.

The Zacks Consensus Estimate for MCY’s 2024 and 2025 earnings implies year-over-year growth of 2,016.67% and 8.66%, respectively.

ProAssurance's bottom line outpaced estimates in three of the trailing four quarters and missed in one, the average surprise being 61.46%. In the past year, shares of PRA have gained 29.5%.

The Zacks Consensus Estimate for PRA’s 2024 and 2025 earnings implies year-over-year growth of 571.4% and 19.3%, respectively.

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