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Should You Hold MGIC Investment (MTG) Stock in Your Portfolio?

·4 min read

MGIC Investment Corporation MTG has been gaining momentum on the back of increasing mortgage origination market, higher annual persistency, profit commission, higher premium yield and solid capital position.

Growth Projections

The Zacks Consensus Estimate for MTG’s 2021 and 2022 earnings per share is pegged at $1.76 and $2.07, indicating year-over-year growth of 33.3% and 17.6%, respectively.

Estimate Trend

Earnings estimates for 2022 have moved up 2.9% in the past 60 days, reflecting investors’ optimism.

Earnings Surprise History

MGIC Investment has a decent earnings surprise history. It beat estimates in each of the last four quarters, the average being 3.76%.

Zacks Rank & Price Performance

MGIC Investment currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 13% compared with the industry’s growth of 5.1%.

Zacks Investment Research
Zacks Investment Research

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Return on Equity (ROE)

The company’s ROE for the trailing 12 months is 12.6%, better than the industry average of 9.5%. This reflects the company’s efficiency in utilizing shareholders’ funds.

Business Tailwinds

New business writings combined with a higher annual persistency are likely to boost insurance in force.

Higher insurance in force, lower ceded premiums written, net of profit commission, and higher premium yield are expected to benefit the net premium written of the multi-line insurer.

The operating results of MGIC Investment should reflect the impacts of gains from solid credit quality of higher insurance in force, strong housing market and decreasing delinquency rate.

New insurance written should gain from the increase in the mortgage origination market.

Considering higher consolidated investment portfolio and investment yields, net investment income is likely to improve.

The loss ratio is likely to improve on the back of improving economic conditions, the quality of the existing book of business and a reduction in new delinquency notices.

MTG boasts a robust balance sheet with a low debt-to-capital ratio. The insurer’s balanced approach to maintaining a strong capital position provides sufficient flexibility to maximize its long-term value. A lower level of losses paid and higher net premium written are likely to benefit the cash flow from operations.

MTG expects claim payments to remain low for the next few quarters, considering the timelines for foreclosure and eviction moratoriums for loans.

In October 2021, the board authorized an additional $500 million share repurchase program through 2023. MTG also repurchased an additional share for $60 million under the remaining authorization that expires at the end of 2021.

Stocks to Consider

Some better-ranked stocks from the multi-line insurance space are Enact Holdings ACT, CNO Financial Group CNO and Old Republic International ORI, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Enact Holdings’ earnings surpassed estimates in each of the last four quarters, the average beat being 5%. In the past year, ACT has lost 2.3%.
The Zacks Consensus Estimate for Enact Holdings’ 2021 and 2022 earnings has moved 2.5% and 9.6% north, respectively, in the past 60 days. Enact Holdings’ expected long-term earnings growth rate is pegged at 11.1%.

In the past year, CNO Financial has rallied 6.1%. The Zacks Consensus Estimate for CNO 2021 and 2022 earnings has moved 5% and 3% north, respectively, in the past 60 days. CNO Financial’s earnings surpassed estimates in three of the last four quarters and missed in one, the average beat being 13.19%.

The bottom line of Old Republic International surpassed estimates in each of the last four quarters, the average being 54.63%. In the past year, ORI has rallied 23.4%. The Zacks Consensus Estimate for Old Republic International’s 2021 and 2022 earnings has moved 11.5% and 12.5% north, respectively, in the past 60 days.


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MGIC Investment Corporation (MTG) : Free Stock Analysis Report

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

Old Republic International Corporation (ORI) : Free Stock Analysis Report

Enact Holdings, Inc. (ACT) : Free Stock Analysis Report

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