Here's Why MGIC Investment (MTG) Stock is an Attractive Bet
MGIC Investment Corporation MTG is well-poised for growth on the back of higher insurance in force, a decline in loss and claims payments, lower delinquency, better housing market fundamentals and prudent capital deployment.
Earnings Surprise History
MGIC Investment has a decent surprise history, beating earnings estimates in each of the last four quarters, the average earnings surprise being 23.59%.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2023 and 2024 earnings has moved up nearly 3.5% and 0.4%, respectively, in the past 60 days, reflecting investors’ optimism.
Return on Equity
MTG’s return on equity for the trailing 12 months is 17.2%, better than the industry average of 10.5%. This reflects efficiency in utilizing shareholders’ funds.
Zacks Rank & Price Performance
MGIC Investment currently carries a Zacks Rank #2 (Buy). Year to date, the stock has gained 34% against the industry’s decrease of 5.5%.
Image Source: Zacks Investment Research
Business Tailwinds
MGIC Investment has been witnessing an increase in new business written. The insurer expects new business, combined with increasing annual persistency, to result in the continued growth of the insurance-in-force portfolio.
MTG has been witnessing a declining pattern of claim filings. Thus, paid claims are likely to decrease further. A decline in loss and claims will strengthen the balance sheet and hence improve its financial profile.
Banking on capital contribution, reinsurance transaction and cash position, this largest private mortgage insurer in the United States has been improving its capital position. Both leverage and times interest earned ratio have been improving.
The multi-line insurer has been seeing improving housing market fundamentals, such as household formations, home sales and the current capital status. As a result, the company will also be well-positioned to offer credit enhancement and low-down payment solutions to lenders, borrowers and government-sponsored enterprises. MTG remains optimistic about the opportunities in the housing market, which will enable the insurer to serve the same much more efficiently in the future.
Riding on a solid capital position, the company returned approximately $209.5 million to shareholders through a combination of share repurchases and dividends in the first half of 2023. The board of directors approved an additional share repurchase program, authorizing the repurchase of an additional $500 million worth of shares through Jul 1, 2025.
Other Stocks to Consider
Some other top-ranked stocks from the multi-line insurance industry are Old Republic International Corporation ORI, Everest Group, Ltd. EG and Lemonade, Inc. LMND, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Old Republic International’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 29.85%.
The Zacks Consensus Estimate for ORI’s 2024 earnings has moved 0.7% north in the past seven days. Year to date, the insurer has gained 10.9%.
Everest Group’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 17.36%.
The Zacks Consensus Estimate for EG’s 2023 and 2024 earnings implies 84.6% and 14.6% year-over-year growth, respectively. Year to date, the insurer has gained 13.2%.
Lemonade’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 10.57%. Year to date, the insurer has gained 34%.
The Zacks Consensus Estimate for LMND’s 2023 and 2024 earnings implies 20.9% and 16% year-over-year growth, respectively.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
MGIC Investment Corporation (MTG) : Free Stock Analysis Report
Old Republic International Corporation (ORI) : Free Stock Analysis Report
Lemonade, Inc. (LMND) : Free Stock Analysis Report
Everest Group, Ltd. (EG) : Free Stock Analysis Report
