Shares of MGIC Investment Corporation MTG closed at $24.75 on Friday, near its 52-week high of $26.56. This proximity underscores investor confidence. It has the ingredients for further price appreciation. The stock is trading above the 50-day and 200-day simple moving averages (SMA) of $24.54 and $23.40, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

Shares of MTG have rallied 23% in the past year, outperforming the industry’s growth of 11.1%. The Finance sector and the S&P 500 composite returned 24.5% and 24.8%, respectively.

MTG Price Performance

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The multi-line insurer has a solid track record of beating earnings estimates in each of the last four quarters, the average being 16.25%.

Attractive Valuation

MGIC Investment shares are trading at a price-to-book multiple of 1.18, lower than the industry average of 2.37. The insurer has a Value Score of B. Before valuation expands, it is wise to take a position in the stock.

Shares of Assurant, Inc. AIZ are trading at a discount to the industry average, while EverQuote, Inc. EVER and CNO Financial Group, Inc. CNO shares are trading at a multiple higher than the industry average.

MTG’s Favorable Return on Capital

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 MTG’s efficiency in utilizing funds to generate income. ROIC was 11.4% in the trailing 12 months, better than the industry average of 2.3%.

Key Drivers of MTG

Given the strong purchase market and potential share gains from the Federal Housing Administration, MGIC Investment expects strong premium writing. Increased persistency rate should continue to boost insurance in force.

The insurance-in-force portfolio is set to grow, banking on new business and increasing annual persistency. A higher level of new and existing home sales, an increased percentage of homes purchased for cash and an improved level of refinance activity in an improving housing market should help this largest private mortgage insurer to grow in the United States.

MTG has been witnessing a declining pattern of claim filings. A decline in loss and claims will strengthen the balance sheet and improve the insurer’s financial profile.

The insurer is improving its capital position with capital contribution, reinsurance transactions and cash position. Both leverage and times interest earned ratios have been improving.

A solid capital position supports MTG in wealth distribution. As of Oct. 31, 2024, the insurer had $578.6 million remaining under a $750 million share repurchase program approved by the board, which expires on Dec. 31, 2026. Its share repurchase activity reflects continued strong mortgage credit performance.

The Zacks Consensus Estimate for MGIC Investment’s 2025 revenues indicates an increase of 2.9% from the corresponding 2024 estimate.

Conclusion

MTG has been seeing improving housing market fundamentals, such as household formations and home sales and the current capital status. Higher premiums, outstanding credit quality and new business will continue to induce growth for MCIG.

The latest 13% increase in its quarterly dividend to 13 cents per share marked four straight years of dividend increases at a compound annual growth rate of 21%. Its current dividend yield is 2.1%. The affordability of shares should also add to the upside. It is, therefore, wise to hold on to this Zacks Rank #3 (Hold) stock at present. 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

CNO Financial Group, Inc. (CNO) : Free Stock Analysis Report

Assurant, Inc. (AIZ) : Free Stock Analysis Report

EverQuote, Inc. (EVER) : Free Stock Analysis Report

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