MGIC Investment (MTG) Up 24% in a Year: Will the Rally Last?
Shares of MGIC Investment Corporation MTG have gained 24.1% in a year against the industry's decline of 0.6%. The Zacks S&P 500 composite has rallied 15.7% in the said time frame. With a market capitalization of $4.58 billion, the average volume of shares traded in the last three months was 2.2 million.
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The rally was largely driven by fewer delinquency notices, favorable loss reserve development, higher persistency and a strong capital position.
MGIC Investment is well-poised for progress, as is evident from its favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.
Back-tested results have shown that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy), offer better returns.
This Zacks Rank #2 multi-line insurer has a solid track record of beating earnings estimates in each of the last four quarters, the average being 30.18%.
Will the Bull Run Continue?
The Zacks Consensus Estimate for 2024 earnings per share is pegged at $2.33, indicating a year-over-year increase of 6.39%.
The Zacks Consensus Estimate for 2023 and 2024 revenues is pegged at $1.18 billion and $1.26 billion, indicating a year-over-year increase of 0.1% and 6.4%, respectively.
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 MGIC Investment.
The operating results of the multi-line insurer should reflect the impacts of gains from the solid credit quality of higher insurance in force, strong housing market and decreasing delinquency rate.
New insurance written should gain from an 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, riding on fewer delinquency notices, reflecting the high quality of insurance in force and favorable loss reserve development that indicates better-than-expected cure rates.
MGIC Investment has constructed a solid capital base to increase the long-term value to shareholders while maintaining financial strength and flexibility.
As of Mar 31, 2023, MTG had $36.1 million of authorization remaining to repurchase shares through the end of 2023 under a share repurchase program approved by the board of directors in October 2021. In April 2023, the multi-line insurer also approved a new share buyback plan, authorizing to repurchase an additional $500 million worth of shares till Jul 1, 2025.
The company’s trailing 12-month return on equity (ROE) reinforces its growth potential. The insurer’s trailing 12-month ROE was 18.8%, which expanded 416 basis points year over year and came ahead of the industry average of 9.8%.
The Zacks Consensus Estimate for 2023 and 2024 has moved 3.3% and 0.4% north, respectively, in the past 60 days, reflecting analysts’ optimism.
MGIC Investment shares are trading at a price-to-book value multiple of 0.96, which is lower than the industry average of 2.28. It also has a Value Score of A. This style score helps find the most attractive value stocks.
Other Stocks to Consider
Some other top-ranked stocks from the multi-line insurance industry are Assurant, Inc. AIZ, Radian Group Inc. RDN and CNO Financial Group, Inc. CNO. While Assurant sports a Zacks Rank #1, Radian and CNO Financial carry a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Assurant’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 9.96%.
The Zacks Consensus Estimate for AIZ’s 2023 and 2024 earnings implies 3.6% and 21.5% year-over-year growth, respectively. In the past year, the insurer has lost 27.9%.
Radian Group’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 38.72%.
The Zacks Consensus Estimate for RDN’s 2023 and 2024 earnings has moved 6.5% and 1.57% north, respectively, in the past 60 days. In the past year, the insurer has gained 26.4%.
CNO Financial’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 15.35%.
The Zacks Consensus Estimate for CNO’s 2023 and 2024 earnings implies 19.3% and 6.2% year-over-year growth, respectively. In the past year, the insurer has gained 36.2%.
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MGIC Investment Corporation (MTG) : Free Stock Analysis Report
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Radian Group Inc. (RDN) : Free Stock Analysis Report
