It's been a good week for MGIC Investment Corporation (NYSE:MTG) shareholders, because the company has just released its latest third-quarter results, and the shares gained 7.2% to US$10.78. Revenues were US$296m, approximately in line with whatthe analysts expected, although statutory earnings per share (EPS) crushed expectations, coming in at US$0.38, an impressive 34% ahead of estimates. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.
Following last week's earnings report, MGIC Investment's eight analysts are forecasting 2021 revenues to be US$1.23b, approximately in line with the last 12 months. Per-share earnings are expected to grow 15% to US$1.58. In the lead-up to this report, the analysts had been modelling revenues of US$1.22b and earnings per share (EPS) of US$1.56 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$13.34. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic MGIC Investment analyst has a price target of US$18.00 per share, while the most pessimistic values it at US$10.00. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's pretty clear that there is an expectation that MGIC Investment's revenue growth will slow down substantially, with revenues next year expected to grow 1.5%, compared to a historical growth rate of 3.6% over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue shrink 7.2% per year. So it's clear that despite the slowdown in growth, MGIC Investment is still expected to grow meaningfully faster than the wider industry.
The Bottom Line
The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, they also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations. Their estimates also suggest that MGIC Investment's revenues are expected to perform better than the wider industry. The consensus price target held steady at US$13.34, with the latest estimates not enough to have an impact on their price targets.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple MGIC Investment analysts - going out to 2022, and you can see them free on our platform here.
We don't want to rain on the parade too much, but we did also find 1 warning sign for MGIC Investment that you need to be mindful of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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