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Here's Why Hold Strategy is Apt for MGIC Investment (MTG)

Zacks Equity Research

MGIC Investment MTG is well-poised for growth based on sizable mortgage insurance in force, declining delinquency, lower levels of paid claims and solid capital position. Long-term earnings growth is pegged at 5%.

Its return on equity was 17.6% in the trailing 12-month period, higher than the industry average of 8.1%. Return on equity is a profitability measure that identifies a company’s efficiency in utilizing its shareholders’ funds.  The company has seen its estimates for 2019 move up 2.4% in the past 60 days, indicating investor optimism on the stock.

The company has an impressive VGM Score of B. This style score helps to find the most attractive value, best growth, and most promising momentum stock.

Shares of MGIC Investment have rallied 24.5% year to date compared with the industry’s increase of 10.5% and the Zacks S&P 500 composite’s rise of 18.6%.


The company had $217.1 billion mortgage insurance in force, the main catalyst of long-term earnings growth, as of Aug 31, 2019. Given solid persistency and an increase in new mortgage insurance business, insurance in force should continue to increase. For 2019, MGIC Investment projects solid writings, given strong purchase market and potential share gain from Federal Housing Administration.

MGIC Investment has been witnessing decline in claim payments, banking on improving housing market and improved credit quality. The company recently reported that its MGIC Investment August primary delinquent inventory declined 10.3% year over year. This, in turn, has strengthened the company’s balance sheet and improved its financial profile.

Capital contribution, reinsurance transaction and improving leverage ratio are also contributing to the strength of its balance sheet. This Zacks Rank #3 (Hold) mortgage insurer has a $200 million buyback authorization, which was approved by the board in March 2019.

The company has a solid earnings surprise history, as it beat estimates in  the last four quarters with the average being 17.39%.

Stocks to Consider

Some better-ranked multiline insurance stocks include Assurant AIZ, Radian Group RDN and MetLife MET, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Assurant provides risk management solutions for housing and lifestyle markets in North America, Latin America, Europe, and the Asia Pacific. The company delivered positive surprise of 9.86% in the last reported quarter.

Radian Group engages in the mortgage and real estate services business in the United States. The company delivered positive surprise of 14.29% in the last reported quarter.

Cigna provides insurance and related products and services in the United States and internationally. The company delivered positive surprise of 15.28% in the last reported quarter.

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