Shares of NMI Holdings (NMIH) have surged 28.9% year to date, significantly outperforming the industry’s 24.6% increase, the Finance sector’s 11.6% growth, and the S&P 500 composite’s 17.5% rise. This impressive performance can be attributed to several key factors. NMIH’s expanding mortgage insurance portfolio, driven by higher new insurance written volume, forms a strong foundation for future earnings. The company’s comprehensive reinsurance program effectively mitigates risks and supports growth. Furthermore, NMIH’s solid capital position and efficient capital deployment strategies contribute to its strong performance.
NMIH’s robust financial performance is further reflected in its impressive return on equity (ROE) and return on invested capital (ROIC). Its trailing 12-month ROE of 18.3% surpasses the industry average of 8%, indicating efficient utilization of shareholder funds. The company targets a medium-term ROE of 13%. Additionally, its trailing 12-month ROIC of 14.8% outperforms the industry average of 6.1%, highlighting the company’s proficiency in generating income from its invested capital.
Analyst sentiment for NMIH remains positive, with the Zacks Consensus Estimate for 2024 and 2025 earnings moving 4.7% and 2.6% higher, respectively, in the past 30 days. This suggests a strong belief in the company’s future earnings potential.
The U.S. residential mortgage market presents significant growth opportunities for NMIH. With nearly $13 trillion of mortgage debt outstanding as of December 31, 2023, the market is vast and offers substantial room for expansion. NMIH’s growth strategy focuses on increasing penetration within its existing customer base, activating new customer accounts, and maintaining its comprehensive reinsurance program to enhance its risk profile.
In addition to organic growth, NMIH actively engages in share buybacks, currently with a $124.9 million share repurchase program. This initiative further enhances shareholder returns and reflects the company’s confidence in its long-term prospects.
Looking ahead, NMIH’s earnings are expected to continue their upward trajectory. The Zacks Consensus Estimate for 2024 earnings is $4.44, representing a 15.6% increase from the previous year. Revenues are projected to rise by 11.8% to $647.1 million. For 2025, the consensus estimate for earnings per share stands at $4.69, signifying a 5.6% year-over-year increase on revenues projected at $689 million. The expected long-term growth rate is pegged at 9.8%, showcasing the company’s potential for sustained growth.
NMIH’s current valuation is attractive, with its shares trading at a price-to-book multiple of 1.49, lower than the industry average of 1.56. This suggests a potential for future valuation expansion. The company’s Value Score of B indicates an attractive valuation, making it an even more compelling investment opportunity. Back-tested results demonstrate that stocks with a Value Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or #2, consistently deliver superior returns.
In addition to NMIH, other top-ranked stocks in the insurance industry include Heritage Insurance (HRTG), Axis Capital Holdings (AXS), and ProAssurance Corporation (PRA), each sporting a Zacks Rank #1 (Strong Buy). These companies have demonstrated consistent earnings performance and offer compelling investment prospects.
