MGIC Investment Corporation (MTG) Soars to 52-Week High, Time to Cash Out?
Shares of MGIC Investment (MTG) have been strong performers lately, with the stock up 4.8% over the past month. The stock hit a new 52-week high of $16.09 in the previous session. MGIC Investment has gained 23.7% since the start of the year compared to the 6.5% move for the Zacks Finance sector and the -8.8% return for the Zacks Insurance - Multi line industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 3, 2023, MGIC reported EPS of $0.54 versus consensus estimate of $0.51 while it missed the consensus revenue estimate by 2.19%.
For the current fiscal year, MGIC is expected to post earnings of $2.19 per share on $1.18 billion in revenues. This represents a -24.74% change in EPS on a 0.13% change in revenues. For the next fiscal year, the company is expected to earn $2.33 per share on $1.26 billion in revenues. This represents a year-over-year change of 6.39% and 6.43%, respectively.
Valuation Metrics
MGIC may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
MGIC has a Value Score of A. The stock's Growth and Momentum Scores are D and D, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 7.3X current fiscal year EPS estimates, which is not in-line with the peer industry average of 8.9X. On a trailing cash flow basis, the stock currently trades at 5X versus its peer group's average of 8.5X. Additionally, the stock has a PEG ratio of 1.47. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, MGIC currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if MGIC meets the list of requirements. Thus, it seems as though MGIC shares could have a bit more room to run in the near term.
How Does MTG Stack Up to the Competition?
Shares of MTG have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Cigna Group (CI). CI has a Zacks Rank of # 2 (Buy) and a Value Score of A, a Growth Score of A, and a Momentum Score of F.
Earnings were strong last quarter. Cigna Group beat our consensus estimate by 3.44%, and for the current fiscal year, CI is expected to post earnings of $24.81 per share on revenue of $188.84 billion.
Shares of Cigna Group have gained 1.9% over the past month, and currently trade at a forward P/E of 10.83X and a P/CF of 8.04X.
The Insurance - Multi line industry is in the top 34% of all the industries we have in our universe, so it looks like there are some nice tailwinds for MTG and CI, even beyond their own solid fundamental situation.
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MGIC Investment Corporation (MTG) : Free Stock Analysis Report
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