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The quarterly results for NMI Holdings, Inc. (NASDAQ:NMIH) were released last week, making it a good time to revisit its performance. It looks like a credible result overall - although revenues of US$108m were what the analysts expected, NMI Holdings surprised by delivering a (statutory) profit of US$0.45 per share, an impressive 26% above what was forecast. 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 thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the most recent consensus for NMI Holdings from six analysts is for revenues of US$478.4m in 2021 which, if met, would be a notable 12% increase on its sales over the past 12 months. Statutory earnings per share are forecast to decrease 7.5% to US$2.17 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$480.5m and earnings per share (EPS) of US$2.36 in 2021. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$25.21, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic NMI Holdings analyst has a price target of US$30.00 per share, while the most pessimistic values it at US$20.00. 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.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the NMI Holdings' past performance and to peers in the same industry. We would highlight that NMI Holdings' revenue growth is expected to slow, with forecast 12% increase next year well below the historical 36%p.a. growth over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue shrink 7.3% per year. So it's clear that despite the slowdown in growth, NMI Holdings is still expected to grow meaningfully faster than the wider industry.
The Bottom Line
The biggest concern is that the analysts reduced their earnings per share estimates, suggesting business headwinds could lay ahead for NMI Holdings. On the plus side, they made no changes to their revenue estimates - and they expect sales to perform better than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on NMI Holdings. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple NMI Holdings analysts - going out to 2022, and you can see them free on our platform here.
However, before you get too enthused, we've discovered 2 warning signs for NMI Holdings that you should be aware 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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